Tokenized deposits could reshape bank funding and make credit more expensive for households and businesses, according to new analysis from Federal Reserve Bank of Dallas economists.

The economists said widespread adoption could reduce the stability and duration of bank deposits. That change could weaken banks’ ability to fund longer-term loans with relatively inexpensive deposits, a core feature of the deposit-based model that supports much of traditional lending.

Deposit Tokenization Could Reshape Bank Funding

Tokenized deposits are traditional commercial bank deposits represented on blockchain-based systems. They can enable faster transfers while remaining within the existing banking framework.

However, faster movement could make deposits more sensitive to interest rates. Customers could shift funds between banks more easily, reducing the frictions that traditionally make some deposits relatively stable.

The Dallas Fed analysis estimates that deposits currently support about 80% of banks’ aggregate duration risk. A 10% decline in the expected life of deposits could reduce banks’ maturity-transformation capacity by roughly $580 billion in 10-year equivalents.

That matters because maturity transformation helps banks turn short-term funding into longer-term credit. If deposits become less sticky, the banking system may have less room to extend loans on the same terms, especially when funding markets are already competing for savers’ cash.

Higher Funding Costs Could Reach Borrowers

If tokenized deposits become more rate-sensitive, banks may need to offer higher rates to retain funding. Alternatively, they could rely more heavily on wholesale debt and other market-based funding.

That shift could raise banks’ funding expenses and put upward pressure on loan rates. The impact could be particularly important for businesses and consumers that depend on longer-term bank financing, where even modest changes in funding costs can affect the economics of lending.

The Federal Reserve has also examined related risks from stablecoins. Earlier research found that shifts away from traditional deposits can increase banks’ funding costs and encourage tighter lending or higher loan pricing.

Tokenization Remains in Early Stages

The Dallas Fed stressed that the eventual effects remain uncertain. Banks are still developing different tokenized-deposit models, including networks that could allow tokens to circulate beyond their issuing institutions.

The technology could improve payments, settlement and financial-market infrastructure. Yet policymakers will need to weigh those benefits against liquidity risks and the possibility that faster transfers could accelerate deposit outflows during periods of financial stress. For banks, that makes the design of tokenized systems important not just for efficiency, but for how they interact with funding stability and lending capacity if adoption broadens over time.