The numbers in that BIS working paper are pretty stark: for every 1-basis-point increase in U.S. bank deposit rates, stablecoin growth over ten weeks drops from 15% to 12%. Three percentage points—the cost of one basis point. People argue all day about whether regulation will choke off stablecoins, but the real ceiling may be sitting in depositors’ checking accounts: banks just have to pay a little more interest, and the money stops flowing out. Data from Borderless.xyz says stablecoin cross-border transfers are 84% cheaper than traditional transfers and arrive faster, but even that advantage gets eroded by interest rates. Jeremy Allaire has his eye on 40 new markets across Southeast Asia, Latin America, Africa, and the Middle East. The demand is real, but the moment deposit rates move, growth softens. It’s a pretty frustrating fight.

My take now is that we’ll have to look at stablecoin growth alongside the Fed’s rate path. If we only keep an eye on regulatory filings, we’ll get the direction wrong. If the people at the banks ever figure it out, nudging up deposit rates a little will do more than writing ten requests for comment.

In all honesty, I spent an afternoon researching the ceiling for stablecoins, only to find out it’s the bank teller asking, “Would you like to put that in a time deposit?” $USDC