Dallas Fed warns tokenized deposits could strip $700 billion from U.S. banks' lending capacity
Economists at the Dallas Fed warn that the adoption of tokenized deposits could reduce the lending capacity of U.S. banks by hundreds of billions of dollars. The report suggests that instant settlement and programmable payments could make deposits less 'sticky,' leading to faster capital flight during periods of market stress.
Why it matters
The potential for tokenized deposits to disrupt traditional bank funding models poses a significant challenge for financial stability and the cost of credit for consumers.
That’s according to estimates from two Dallas Fed economists . A separate scenario found that if tokenization causes deposits to leave banks 10% sooner, banks could lose about $580 billion of capacity to absorb the interest-rate risk of long-term loans and securities, the economists estimated.
The article reports on economic research findings regarding financial stability risks without injecting editorial bias.
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