Economists at the Federal Reserve Bank of Dallas have warned that wider adoption of tokenized deposits could put pressure on U.S. banks’ ability to support long-term lending. Their estimates suggest that if tokenization makes depositors just 10% more sensitive to interest rates, banks could lose roughly $700 billion of capacity to absorb long-term interest-rate risk.

How Tokenized Deposits Could Change Depositor Behavior

Tokenized deposits place commercial bank money on blockchain-based infrastructure, enabling programmable payments and near-instant settlement while keeping funds within the regulated banking system.

However, these same features could reduce the frictions that currently make deposits relatively stable sources of bank funding.

Dallas Fed economists Rosie Levy and Srini Ramaswamy said instant settlement could allow depositors focused on higher yields to switch banks almost immediately.

Smart contracts and agentic AI could theoretically automate this process, moving deposits between banks without requiring direct action from the account holder.

$700 Billion Reduction in Risk-Bearing Capacity

The economists estimate that “other deposits,” excluding large time deposits, support approximately $5.8 trillion, or around 80%, of the U.S. banking system’s roughly $7 trillion in long-term interest-rate exposure.

Under a scenario in which deposit price sensitivity to interest rates rises by 10%, assuming an average deposit life of four years, banks’ capacity to absorb long-term interest-rate risk could decline by approximately $700 billion.

In a separate scenario, if tokenization causes the average life of deposits to fall by 10% and money leaves banks sooner, the reduction in capacity could reach about $580 billion.

Banks Could Face Higher Funding Costs

If deposits become easier and faster to move between institutions, banks may have to offer higher rates to retain customers.

They could also respond by holding more reserves and U.S. Treasuries or by relying more heavily on term debt.

According to the Dallas Fed economists, if banks use more expensive debt to maintain existing levels of lending, the shift would likely increase the cost of credit for consumers and businesses.

Brazil’s Pix System Offers an Early Comparison

Brazil provides an early example of how faster payment infrastructure may affect banking behavior.

A 2025 study of Brazil’s Pix instant-payment network found that heavier use of the system increased banks’ holdings of liquid assets, particularly government bonds, while reducing credit intermediation.

Banks also increased the share of subprime loans in their remaining loan portfolios as they sought higher returns.

Tokenized Deposits Remain at an Early Stage

Tokenized deposits are still at an early stage of development and are generally difficult to transfer between different issuers.

However, The Clearing House and banks including Bank of America, Citi and Wells Fargo are developing an interoperable network designed to support cross-bank clearing, automated workflows and 24/7 settlement.

Summary

The Dallas Fed estimates highlight how features such as instant settlement, programmable payments and faster movement of deposits could change the way banks manage liquidity and fund longer-term assets.

Tokenized deposits, however, remain at an early stage of development, and their ultimate impact on the U.S. banking system will depend on how the technology is designed, implemented and adopted.

source : https://www.coindesk.com/business/2026/08/26/dallas-fed-warns-tokenized-deposits-could-strip-usd700-billion-from-u-s-banks-lending-capacity