Dallas Fed Warns Tokenized Deposits May Cut Bank Lending

TREE NEWS reports: The Dallas Federal Reserve reported that tokenized deposits could let customers move funds faster for higher yields, weakening bank funding stability. It estimates a 10% increase in deposit rate sensitivity could cut banks’ interest-rate risk capacity by about $700 billion, and a 10% shorter weighted average deposit maturity could reduce term transformation capacity by $580 billion. Unlike stablecoins, tokenized deposits are regulated and interest-bearing, but instant settlement, smart contracts, and AI may reduce deposit stickiness.