Circle CEO Seeks ‘The Happy Middle’ For USDC As BIS Finds Deposit Rates Weigh More On USDC Than Tether

Higher Fed rates also push banks to provide better deposit rates, which may slow adoption of stablecoins as users weigh their options.

• Circle CEO Jeremy Allaire said Arc’s validators were “known” and “not anonymous.” 
• A BIS paper found that higher deposit rates weighed more on USDC’s growth than on Tether’s USDT. 
• The paper found that banks passed on more of the Fed’s moves to depositors once rates topped about 3%. 

Circle (CRCL) CEO Jeremy Allaire said the company was trying to find "the happy middle" for USDC between open crypto networks and bank standards, while a Bank for International Settlements (BIS) study found that higher deposit rates weighed more on USDC's growth than on Tether's USDT.

In a Saturday discussion with Chris Dixon, founder of a16z crypto, Allaire explained that anyone could build on Arc blockchain and deploy software on it. He said that the difference was who runs it. “The actual operators of the validation infrastructure are known. They’re not anonymous,” Allaire said.

Circle Wants Decentralization, But Not Without Rules

Those operators were chosen based on the operating and legal commitments they made. Allaire said the world’s financial institutions would want those commitments before they relied on the network. “It is not fully decentralized,” he said. “We’re trying to find the happy middle.” Circle launched the Arc mainnet in September. 

According to Allaire, “USDC is [not] centralized. It’s a centralized issuer,” meaning it isn’t decentralized like Bitcoin (BTC). However, the stablecoin does run on the principles of decentralization. For instance, USDC can be transferred across supported blockchains without having to pass through Circle’s own payment system every time.

Allaire said that to plug into the real-world financial system, it had to be built that way. “I want the main finance system running on this.” 

Circle stock fell over 5% on Friday. On Stocktwits, retail sentiment around CRCL remained in the ‘bearish’ zone, while chatter stayed at ‘low’ levels over the past day.

Higher Bank Rates Pose a Bigger Threat To USDC Than USDT, BIS Study Finds

Allaire’s comments came just days after a Bank for International Settlements study found that higher bank deposit rates weighed more on USDC’s growth than on Tether’s USDT. 

The paper examined weekly U.S. data from January 2019 to June 2025, and found that higher deposit rates predicted slower stablecoin growth. The effect was “stronger for USDC than for USDT, consistent with the former’s closer ties to U.S. depositors,” the paper said.

The paper estimated that a 1-basis-point rise in deposit rates was associated with a 4.8 percentage points less cumulative, USDC growth over 10 weeks, while USDT fell only 1.9%.

It linked the gap to USDC’s wider use among US institutional and decentralized finance (DeFi) users and said USDT was mostly used offshore and in developing economies.

The paper also found that banks passed on more of the Fed’s moves to depositors once the Fed funds rate rose above about 3%. The Federal Reserve raised its target range to 3.75% to 4.00% last month, putting rates above that level. Stablecoin growth “slows but does not necessarily reverse,” the authors wrote.

The Second Lever

The paper said that “banks retain some influence over the pace of that adoption through deposit pricing.” They called whether issuers may pay holders “a second lever.”

That question sat at the center of the CLARITY Act, the crypto market structure bill, which stalled in the Senate. Stablecoin yield has been a key sticking point in the talks.

For updates and corrections, email newsroom[at]stocktwits[dot]com.<