In an analysis published by the Federal Reserve Bank of Dallas, economists Rosie Levy and Srini Ramaswamy examined how tokenized deposits could change the relationship between bank funding and lending.
Faster Deposits Could Make Bank Funding More Sensitive
Traditional bank deposits can be relatively stable because moving money between financial institutions takes time and involves some friction.
Tokenized deposits could remove much of that friction.
With instant settlement, depositors could potentially move funds between banks much faster when another institution offers a better yield.
The economists said programmable deposit tokens and agentic artificial intelligence could make those transfers even easier by automating decisions about where money should be held.
That could make deposits more responsive to interest-rate differences and reduce the amount of time money remains with individual banks.
$700 Billion Scenario for Bank Asset Capacity
The Dallas Fed economists modeled several scenarios to examine what could happen if deposits became more sensitive to market conditions.
In one scenario, deposits becoming 10% more sensitive to interest rates could reduce banks' capacity to hold long-term loans and other assets by approximately $700 billion.
A second scenario found that deposits remaining at banks for 10% less time could reduce that capacity by roughly $580 billion.
These figures are expressed in 10-year equivalents and should not be interpreted as direct reductions in bank lending.
The economists emphasized that the calculations are scenarios rather than forecasts and do not imply a dollar-for-dollar decline in loans to households or businesses.
Why Tokenized Deposits Could Change Banking
Tokenized deposits are essentially digital representations of bank deposits that can operate using blockchain or distributed-ledger infrastructure.
Unlike many cryptocurrencies, they can remain connected to the existing regulated banking system.
The potential advantage is speed.
Banks could use tokenized deposits to facilitate 24/7 settlement, automated payments and programmable financial transactions.
However, the same efficiency could make deposits more mobile.
If customers can instantly transfer tokenized funds between banks, lenders may have to compete more aggressively for deposits by offering better rates.
That could increase banks' funding expenses.
Banks Could Need More Liquid Assets
If deposits become less predictable, banks could respond by holding larger amounts of highly liquid assets.
The Dallas Fed economists identified bank reserves and U.S. Treasury securities as examples of assets banks could use to strengthen their liquidity positions.
While this could make banks better prepared for rapid deposit movements, it could also change how much capital is available for longer-term lending.
Banks could alternatively increase their reliance on term debt and wholesale funding.
But replacing relatively inexpensive deposits with more expensive forms of borrowing could eventually raise the cost of credit for consumers and businesses.
U.S. Banks Are Already Building Tokenized Deposit Networks
The potential risks are emerging at the same time that banks are actively developing blockchain-based payment infrastructure.
Banking organizations are exploring networks that could support tokenized deposits, stablecoins and automated settlement while keeping financial activity within regulated institutions.
The trend reflects a broader shift toward using blockchain technology for the movement and settlement of traditional money rather than simply for cryptocurrency trading.
If these systems become widely adopted, deposits could potentially move between institutions with significantly less friction than they do today.
Cross-Border Banking Is Also Moving Onchain
The development is not limited to domestic U.S. payments.
Banks are also experimenting with blockchain infrastructure for international transactions.
For example, Swift has been developing blockchain-based infrastructure designed to connect financial institutions and support transactions involving tokenized assets and digital forms of money.
Such systems could eventually allow banks to coordinate payment and settlement activity more quickly across borders.
The potential benefits include faster settlement and greater automation, but the Dallas Fed analysis suggests that policymakers and banks also need to consider how this speed could affect the stability of bank funding.
Brazil's Pix System Offers a Useful Comparison
The economists also pointed to Brazil's Pix instant-payment system as a potential comparison.
Pix is not the same as tokenized deposits, but both involve faster movement of money and reduced payment friction.
A 2025 study from the Central Bank of Brazil found that greater Pix usage was associated with higher bank holdings of liquid assets and reduced credit intermediation.
The comparison does not prove that tokenized deposits will produce the same outcome.
Instead, it provides an example of how faster payment infrastructure can potentially influence banks' liquidity management and lending behavior.
Tokenization Creates a Trade-Off for Banks
The Dallas Fed analysis highlights a fundamental trade-off.
Tokenized deposits could make payments faster and financial markets more efficient, while simultaneously making bank funding more mobile.
For consumers, faster transfers could mean greater flexibility when choosing where to keep their money.
For banks, however, rapidly moving deposits could make it harder to rely on stable funding for long-term loans.
That could encourage banks to hold more liquid assets or seek alternative funding sources.
Could Tokenized Deposits Make Loans More Expensive?
The potential impact on consumers ultimately depends on how banks respond.
If lenders need to replace a larger share of deposits with wholesale or term funding, their funding costs could increase.
Banks could then pass some of those costs through to borrowers in the form of higher interest rates.
The result could be more expensive mortgages, business loans and other forms of credit, although the Dallas Fed analysis does not predict that this will necessarily happen.
The scenarios instead demonstrate how changes in deposit behavior could affect banks' balance sheets.
Tokenized Deposits Could Reshape the Banking System
The growth of tokenized deposits represents a significant evolution in financial infrastructure.
Blockchain technology is increasingly being considered not only for cryptocurrencies but also for commercial bank money, settlement, collateral and payments.
The Dallas Fed analysis adds an important caution to that development.
Making money programmable and instantly transferable could improve efficiency, but it could also change the economics of traditional banking.
The challenge for banks and policymakers will be finding a balance between faster digital settlement and maintaining stable funding for the long-term lending that supports households and businesses.
What Banks and Investors Should Watch Next
The next stage of tokenized deposit development will likely focus on how banks manage liquidity as blockchain-based payment networks expand.
Key areas to watch include deposit migration, interest-rate sensitivity, bank liquidity requirements, wholesale funding costs and the growth of tokenized deposit networks.
If tokenized deposits become widely adopted, banks may need to rethink how they compete for deposits and finance long-term assets.
For now, the Dallas Fed's analysis does not suggest that tokenized deposits will inevitably reduce lending.
Instead, it highlights a potential unintended consequence of faster money: when deposits can move instantly, the funding behind the banking system may become more expensive and less predictable.
