Dallas Federal Reserve Warns: Tokenized Deposits Could Erode Banks' $700 Billion Lending Capacity

Dallas Fed releases a report stating that the widespread adoption of tokenized deposits could increase deposit sensitivity to interest rates, accelerate cross-bank fund flows, and weaken banks’ liquidity and maturity transformation capabilities, thereby impacting bank credit supply and funding costs. The report notes that unlike stablecoins such as USDT and USDC, tokenized deposits are typically issued by regulated banks and accrue interest. Technologies including blockchain’s instant settlement, smart contracts, and agent-based AI could make it easier for customers to quickly move funds to chase higher yields, eroding the "stickiness" of traditional bank deposits. The Dallas Fed estimates that if deposit rate sensitivity rises by 10%, banks’ capacity to bear interest rate risk could decrease by roughly $700 billion (calculated on a 10-year equivalent basis); if the weighted average maturity of deposits shortens by 10%, the banking system’s maturity transformation capacity could decline by around $580 billion. The report argues that if banks still aim to maintain their current loan volumes, they may need to rely more on wholesale funding such as term debt, ultimately making banks’ loan funding models more similar to those of non-bank financial institutions and potentially driving up credit costs for consumers and businesses. Currently, multiple global banks have begun testing tokenized deposits and 24/7 settlement systems, and the potential impact of tokenized deposits on the traditional banking system is drawing growing attention from regulators.