Visa’s USDC Growth Meets Pressure From Higher Bank Rates

A Bank for International Settlements study found that a 1-basis-point increase in bank deposit rates reduces stablecoin market-capitalization growth by about 3% over 10 weeks. Stablecoins generally do not pay interest, making bank deposits more attractive when yields rise.

Stablecoin market capitalization is growing at an estimated annual rate of 15%. The rate would fall to about 12% under the effect identified in the study.

USDC growth was more sensitive to higher bank rates than Tether’s USDT. The study linked higher rates to a 4.8-percentage-point decline in USDC growth and a 1.9-point decline in USDT growth. Researchers found no significant relationship between interest rates and the growth of other cryptocurrencies.

Visa is expanding USDC payment use through Visa Direct. The service supports cross-border payouts funded with USDC for wage payments and purchases in more than 180 countries. Inyo Global is the first partner. Businesses can use the service outside traditional banking hours and without correspondent banking networks.

Visa’s dollar-based stablecoin settlement volume has reached an annualized run rate of $20 billion, more than 15 times the level recorded a year earlier. The volume includes payment transactions in addition to stablecoin activity linked to trading and decentralized finance.

USDC’s circulating supply is about $72.6 billion, according to DeFiLlama. The total market capitalization of stablecoins exceeds $300 billion. Comparing settlement volume with USDC’s circulating supply can show how much of the token is used in transactions rather than held.

If settlement activity grows faster than USDC’s supply, repeated transactions using prefunded balances could create additional demand for the token. The BIS study indicates that higher deposit rates may slow the creation and expansion of stablecoins, but it does not indicate that rate increases would remove the existing supply from the market.