DeFi-ying the Fed? Monetary Policy Transmission to Stablecoin Deposit Rates (Banque de France)

Summary

• Over the January 2021–January 2026 period, DeFi deposit rates averaged approximately 100 bps above the Federal funds target rate, but remained persistently below policy rates from mid-2022 to end-2023.p.5
• Total deposits in Aave surpassed $50 billion in value since August 2025, while total value locked across all DeFi lending protocols reached $86 bn in September 2025 (more than 5-fold its 2023 value).p.4
• Stablecoin capitalization reached an all-time high of $290 bn as of September 2025, doubling over the same period.p.4
• Around a median 50-bp policy rate hike, DeFi deposit rates exhibit an unconditional pass-through of roughly 15 bps after one week.p.12
• Following a policy rate hike, liquidity providers integrated with traditional finance reduce supplied liquidity by approximately 3–4% more than non-TradFi investors.p.51

Key insights

1. Monetary policy shocks can move DeFi deposit rates in the opposite direction of policy rates in the short run because crypto deleveraging dominates standard interest-rate arbitrage.p.1
2. DeFi deposit rates exhibit weak short-run pass-through but converge toward traditional risk-free rates over the medium to long run.p.1
3. DeFi lending activity and deposit rates track Bitcoin price movements and leverage demand more closely than money-market benchmarks.p.12
4. A restrictive 25-basis point monetary policy shock generates an approximate 10 percent peak reduction in both borrowed and supplied stablecoin quantities.p.38
5. Traditional risk proxies (liquidation, depegging, hacking, and interest rate volatility) account for only about one third of the variation in DeFi spreads.p.22
6. Ethereum gas fees act as a key transaction friction, with higher gas costs significantly prolonging the persistence of DeFi rate spreads between 5% and 25%.p.46
7. Wallets exclusively holding USDC respond more actively to Federal Reserve rate changes than general DeFi participants, confirming the presence of a traditional finance arbitrage channel.p.48