Dallas Fed economists say tokenized deposits could curb US banks’ capacity for long-term rate risk

CoinDesk reported that two economists at the Federal Reserve Bank of Dallas modeled how tokenized deposits could affect US banks’ ability to absorb long-term interest-rate risk. In one scenario, if tokenized deposits make depositors 10% more sensitive to interest rates, US banks’ capacity to hold long-term rate risk could fall by about $700 billion. In a second scenario, if tokenization causes 10% of deposits to leave banks earlier, banks’ capacity to absorb interest-rate risk tied to long-term loans and securities could drop by about $580 billion. The estimates outline how changes in depositor behavior, rather than a direct balance-sheet shock alone, may alter banks’ role in carrying duration risk.