Tokenized deposits could make bank funding less stable and raise credit costs for US households and businesses, according to an analysis by two economists at the Federal Reserve Bank of Dallas.

Economists Rosie Levy and Srini Ramaswamy said instant settlement could allow depositors seeking higher yields to switch banks more quickly. Programmable deposit tokens and agentic artificial intelligence could automate those transfers, shortening the time deposits remain at individual banks and making them more sensitive to interest rates. The concern touches a core feature of banking: lenders fund long-term assets such as mortgages and business loans with deposits that customers can withdraw on demand, a model that has historically depended on deposits being relatively slow to move.

Scenario estimates, not forecasts

The economists estimated that if deposits became 10% more sensitive to interest rates, banks' capacity to hold long-term loans and other assets could fall by about $700 billion. In a separate scenario, deposits remaining at banks for 10% less time could reduce that capacity by about $580 billion.

Both figures are expressed in 10-year equivalents and do not represent direct reductions in lending. The calculations are scenarios rather than forecasts and do not equate to dollar-for-dollar reductions in bank lending.

Banks build networks for tokenized deposits

The analysis comes as US banks construct shared blockchain networks designed to move tokenized deposits around the clock while keeping customer funds within the regulated banking system. Tokenized deposits are digital representations of conventional bank deposits recorded on shared ledgers; unlike stablecoins, which came under a federal regulatory framework with the 2025 GENIUS Act, they remain claims on a commercial bank and sit inside the existing deposit insurance and supervisory regime.

On Tuesday, 39 US state banking associations formed the BankChain Alliance to develop a nationwide network supporting tokenized deposits, stablecoins and automated settlement. Separately, The Clearing House is building a network backed by JPMorgan Chase, Bank of America, Citi, BNY and Wells Fargo.

Banks have also begun connecting tokenized-deposit systems across institutions. On Aug. 20, Standard Chartered and HSBC completed a live cross-border transaction through Swift's blockchain ledger, which linked the banks' separate systems and recorded their resulting obligations before settlement through existing payment infrastructure.

How banks might respond

Levy and Ramaswamy said banks could respond to more volatile deposits by holding larger portfolios of highly liquid assets, including reserves and US Treasurys. Banks could also rely more heavily on term debt to maintain their lending portfolios, although funding loans through wholesale debt would likely increase credit costs for consumers and businesses.

The authors cited Brazil's Pix instant-payment system as a potential comparison, while noting that it is not identical to tokenized deposits. A 2025 study found that heavier Pix use increased banks' holdings of liquid assets and reduced credit intermediation. The rollout of the new US networks will be an early test of whether deposit behavior shifts in the ways the Dallas Fed scenarios envision, and of whether banks respond by reshaping their balance sheets as the Pix research suggests.

Related: US regulator mulls guidance for tokenized deposit insurance, stablecoins

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