Economists at the Federal Reserve Bank of Dallas estimate that tokenized deposits could materially reduce U.S. banks’ capacity to absorb long-term interest-rate risk, a function tied to how banks fund lending. According to a CoinDesk report, if tokenized deposits make depositors 10% more sensitive to interest rates, banks’ ability to hold that risk could fall by about $700 billion. In a separate scenario, if 10% of deposits leave banks earlier than expected, the reduction could reach roughly $580 billion. The estimates assume deposits remain at banks for an average of four years, while "other deposits" currently support about 80% of the banking system’s long-term interest-rate exposure. Dallas Fed economists said tokenized deposits can bring commercial bank money on-chain and enable programmable payments and real-time settlement, but they may also make it much easier for yield-seeking customers to switch banks almost instantly. In theory, smart contracts and AI agents could automate that process, reducing deposit stickiness and raising funding costs for banks, with knock-on effects on borrowing costs for consumers and businesses. The report also cited research on Brazil’s Pix network and noted ongoing interoperability work in the U.S. banking sector.
Economists at the Federal Reserve Bank of Dallas estimate that tokenized deposits could reduce U.S. banks’ capacity to hold long-term interest-rate risk by about $700 billion if depositors become 10% more sensitive to interest rates, according to CoinDesk.
In another scenario, that capacity could shrink by roughly $580 billion if 10% of deposits leave banks earlier than expected. The estimates are based on an assumption that deposits stay at banks for an average of four years. "Other deposits" currently support about 80% of the banking system’s long-term interest-rate exposure.
Lower deposit stickiness is central to the concern
Dallas Fed economists said tokenized deposits would move commercial bank money on-chain while enabling programmable payments and real-time settlement. At the same time, they said, the model could allow yield-seeking depositors to switch banks almost instantly. Smart contracts and AI agents could, in theory, automate that process, weakening deposit stickiness and pushing up bank funding costs, which would then affect borrowing costs for consumers and businesses.
Brazil’s Pix offers a reference point
The report cited research on Brazil’s instant payment network Pix, which found that greater use of the system led local banks to hold more liquid assets while the scale of credit intermediation declined.
Interoperability work is already underway in the U.S.
The Clearing House is currently developing an interoperable tokenized deposit network for interbank clearing with Bank of America, Citigroup, Wells Fargo, and other institutions.
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