Why could tokenised deposits reduce US banks’ lending capacity?

Tokenised deposits could make customer funds easier to move between banks. Dallas Fed economists estimate this could reduce banks’ long-term interest-rate risk capacity by $700 billion.

What are tokenised deposits?

Tokenised deposits are bank deposits recorded on a blockchain. They can support programmable payments and faster settlement while remaining inside the regulated banking system.

How much could banks lose if deposits move faster?

The Dallas Fed economists estimated banks could lose about $580 billion in long-term interest-rate capacity if deposits leave banks 10% sooner.

What does higher deposit rate sensitivity mean for banks?

A 10% increase in deposit rate sensitivity could reduce banks’ long-term interest-rate capacity by about $700 billion, according to the Dallas Fed analysis.

How could tokenised deposits affect borrowing costs?

Banks could use more expensive funding if deposits become less stable, and Dallas Fed economists said this could raise credit costs for consumers and businesses.

Economy

Image for illustrative purposes only. Not a real photo.

Dallas Fed estimates $700B lending impact

Written by Jon CuthbertPublished Aug 27, 2026, 12:53 AM

Dallas Fed economists estimate tokenised deposits could reduce US banks’ capacity by US$700 billion.
The estimate assumes depositors become 10% more sensitive to interest rates.
Faster transfers could push banks towards higher funding costs.

Dallas Fed economists estimate tokenised deposits could reduce US banks’ capacity by about US$700 billion.

The estimate assumes depositors become 10% more sensitive to interest rates and move money more easily.

“Instant settlement would allow deposit holders who prioritize yield to switch banks almost instantaneously,” said Dallas Fed economists Rosie Levy and Srini Ramaswamy.

A separate scenario suggests banks could lose about US$580 billion if deposits leave 10% sooner.

Banks could respond by paying higher deposit rates, holding more liquid assets or using more expensive debt.

Higher funding costs could raise borrowing costs for consumers and businesses, according to the economists.

The analysis examines how faster deposit transfers could affect bank funding while tokenised deposits remain at an early stage.