Tokenized deposits could make bank funding less stable and raise the cost of borrowing for U.S. households and companies, according to an analysis by two Dallas Federal Reserve economists.
Economists Rosie Levy and Srini Ramaswamy said instant settlements could allow yield-seeking depositors to change banks more quickly. They said programmable deposit tokens and agentic artificial intelligence could automate transfers, shortening the stay duration of deposits at individual banks and increasing their sensitivity to interest rates.
The economists estimated that a 10% increase in the interest-rate sensitivity of deposits could reduce banks' capacity to hold long-term loans and other assets by approximately $700 billion. In a separate scenario, a 10% reduction in deposit stay duration at banks could shrink that capacity by about $580 billion. Both figures are presented in 10-year equivalent terms and do not imply a direct reduction in lending.
The calculations represent scenarios, not forecasts, and do not imply a proportional reduction in dollar terms of bank lending. They come as U.S. banks are setting up joint blockchain networks designed to move tokenized deposits around the clock while keeping client funds within the regulated banking system.
Banks Building Networks for Tokenized Deposits
On Tuesday, thirty-nine U.S. state banking associations formed the BankChain alliance to develop a nationwide network supporting tokenized deposits, stablecoins, and automated settlements. The Clearing House is developing a separate network with support from JPMorgan Chase, Bank of America, Citi, BNY, and Wells Fargo.
Banks have also begun linking tokenized deposit systems across different institutions. On August 20, Standard Chartered and HSBC conducted a live cross-border transaction via the Swift blockchain ledger, which connected the banks' separate systems and recorded the obligations that arose between them before settling through existing payment infrastructure.
Related: US regulator considers recommendations for insuring tokenized deposits and stablecoins
Levy and Ramaswamy said banks might respond to more volatile deposits by increasing holdings of highly liquid assets, including reserves and U.S. Treasuries. They said banks could also rely more on term debt to support their loan portfolios, although funding loans with wholesale debt is likely to raise the cost of borrowing for consumers and companies.
The authors pointed to Brazil's Pix instant payment system as a potential comparison, while noting it is not identical to tokenized deposits. A 2025 study found that greater use of Pix increased banks' holdings of liquid assets and reduced credit intermediation.
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