Dallas Fed Warns Tokenized Deposits Could Put $580B of Bank Lending at Risk

A new study published by economists at the Federal Reserve Bank of Dallas warns that the adoption of tokenized deposits could reduce the US banking sector’s capacity to absorb long-term interest rate risks by up to $580 billion. The report reveals that real-time settlement and blockchain programmability would enable users to move capital almost instantaneously in search of higher yields, shortening the average duration of funds held in traditional institutions.

This dynamism threatens to undermine the stability of commercial deposits, the foundation upon which banks sustain nearly 80% of their exposure to long-term mortgage and corporate loans. To retain liquidity or offset volatility driven by smart contracts and artificial intelligence agents, institutions would be forced to raise the rates paid on liabilities or resort to costly wholesale debt, directly driving up borrowing costs for businesses and consumers.

As consortiums like The Clearing House and banking giants such as Citi or Bank of America advance 24/7 tokenized payment infrastructures, regulators will need to calibrate liquidity frameworks to prevent financial innovation from ultimately constraining the flow of traditional credit to the real economy.

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