The European Central Bank has published a working paper examining how Federal Reserve monetary policy affects deposit rates on USD-pegged stablecoins in decentralized finance. Using Aave data from 2021 to 2026, the authors find that DeFi deposit rates averaged about 100 basis points above the federal funds rate but showed large and persistent deviations. Policy shocks can initially move DeFi rates in the opposite direction from conventional rates, although the rates converge over the medium term. The weak short-term transmission reflects competing channels. Higher risk-free rates encourage investors with access to traditional markets to withdraw DeFi liquidity, pushing DeFi rates higher, while falling crypto prices prompt borrowers to deleverage, reducing borrowing demand and pushing rates lower. The balance varies by token, with USDC showing stronger links to traditional finance and faster pass-through than USDT. Transaction fees, limited capital and a shortage of large arbitrageurs able to bridge traditional and decentralized finance further slow convergence.
2026-09-14European Central Bank
European Central Bank working paper finds weak and unstable Federal Reserve rate pass-through to stablecoin DeFi deposit rates
An European Central Bank working paper finds that Federal Reserve policy transmits weakly and unevenly to stablecoin DeFi deposit rates, which averaged about 100 basis points above the federal funds rate from 2021 to 2026. Deleveraging after crypto price declines can initially move rates against the policy direction, while limited arbitrage and transaction costs delay medium-term convergence.