DeFi-ying the Fed? Monetary policy transmission to stablecoin deposit rates

Andrea Barbon, Jean Barthélemy and Benoît Nguyen

No 3280, Working Paper Series from European Central Bank

Abstract: Does the Federal Reserve’s monetary policy influence the rates on USD-pegged stablecoins? While major stablecoin issuers do not pay interest, investors can earn returns by depositing stablecoins in Decentralized Finance (DeFi) protocols. We document unusually large and persistent spreads between traditional short-term interest rates and DeFi deposit rates, as well as a weak and unstable transmission of policy rate changes. We show that, in the short run, monetary policy shocks can move stablecoin rates in the opposite direction of policy rates, delaying a convergence that occurs only over the medium run. Both the sign of the short-run effect and the speed of convergence depend on the intensity of deleveraging induced by crypto-price reactions relative to the standard interest-rate arbitrage channel — an effect shaped by investors’ limited ability to bridge traditional and decentralized finance. JEL Classification: G14, G23, G29

Keywords: crypto; DeFi; stablecoin (search for similar items in EconPapers)
Date: 2026-09
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