The widespread adoption of tokenized deposits could alter banks' funding models, while instant transfers between institutions could reduce the stability of such funding sources and constrain lending. This was stated by economists Rosy Levy and Sreeni Ramaswamy of the Federal Reserve Bank (FRB) of Dallas.
Real-time settlements are considered one of the technology's advantages. However, the economists saw a potential drawback in this feature for banks.
Currently, a portion of deposits remains relatively stable due to customer-bank relationships and technical barriers to quickly moving funds. Such balances allow credit institutions to forecast how long the money will stay on their balance sheets.
Tokenization could reduce these barriers. Clients will be able to transfer funds to banks with higher rates more quickly, and programmable features will allow such operations to be automated.
The authors specifically highlighted AI agents. In combination with smart contracts, they could theoretically autonomously monitor returns and transfer tokenized deposits between banks without the owner's direct action.
Model Shows Effect Up to $700 Billion
Levy and Ramaswamy assessed how changes in deposit behavior could affect the transformation of terms. According to their calculations, about 80% of the interest rate risk that U.S. banks take on when holding long-term assets is currently supported by deposit characteristics. This is equivalent to roughly $5.8 trillion out of a total of $7 trillion in such exposure.
If the average term of deposits on bank balance sheets decreases by 10%, the aggregate capacity of banks to take on interest rate risk would decrease by approximately $580 billion in equivalent 10-year assets.
A 10% increase in the sensitivity of deposit rates to market rates would have an even greater effect: about $700 billion in equivalent 10-year assets, according to the model calculation.
These amounts do not mean a direct reduction in lending of $580 billion or $700 billion. The indicator reflects the change in banks' ability to hold assets with interest rate risk after conversion to an equivalent of 10-year government bonds.
Banks could compensate for part of the effect, for example by attracting longer-term funding. However, such debt is usually more expensive than deposits.
"This would likely negatively impact the cost of credit for consumers and businesses," the authors noted.
Banks Will Have to Hold More Liquid Assets
Another consequence could be a change in the structure of bank balance sheets. If tokenized deposits allow clients to withdraw significant amounts almost instantly, it will become more difficult for financial institutions to predict daily outflows. In stress scenarios, regulatory models might also start considering such liabilities as less stable.
As a result, credit institutions will have to increase their holdings of highly liquid assets (primarily reserves and US Treasury bonds), which could reduce the share of funds available for less liquid assets, including loans to businesses and households.
At the same time, the size of the deposit base for the entire banking system does not necessarily decrease. Money may simply move faster between individual organizations. The risk arises because it becomes harder for each bank to rely on the stability of its own balances.
As a rough analogy, the authors considered the Brazilian instant payment system Pix. It allows money to be transferred between banks 24/7 in real time.
By Q1 2026, the system had about 200 million active users, and the monthly transaction volume reached approximately $650 billion. A 2025 study by the Central Bank of Brazil showed that more active use of Pix was accompanied by an increase in banks' holdings of liquid assets, primarily government bonds, and a decrease in credit intermediation.
The Dallas Fed economists emphasized that Pix is not a complete analog of tokenized deposits. However, both technologies allow money to be transferred between banks almost instantly, so Brazil's experience may provide insight into potential consequences.
Banks Accelerate Deposit Tokenization
The analysis comes amid an acceleration of bank projects with tokenized money. On August 26, 39 state banking associations in the US formed the BankChain alliance. It plans to launch a nationwide blockchain network in 2027 supporting tokenized deposits, stablecoins, and programmable settlements.
In June, JPMorgan Chase, Citigroup, Bank of America, Wells Fargo, and other financial organizations announced the creation of their own infrastructure for bank on-chain money through The Clearing House.
On August 19, HSBC and Standard Chartered conducted the first real interbank transaction with tokenized deposits on the SWIFT blockchain infrastructure. The service is designed to provide 24/7 interbank settlements and more efficient liquidity management.
The authors of the study believe the field is still in its early stages. Potential consequences will depend on system architecture, interbank interaction rules, and how widely tokenized deposits can circulate between different issuers.
Recall that in July, the ForkLog editorial team analyzed the structure of tokenized deposits and their difference from stablecoins.
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