Dallas Fed Warns Tokenized Deposits Could Reduce Bank Lending Capacity

Economists at the Federal Reserve Bank of Dallas have warned that the widespread adoption of tokenized deposits could significantly weaken the U.S. banking system's ability to manage long-term interest rate risks, potentially reducing its capacity by hundreds of billions of dollars. In a report published on August 25, researchers Rosie Levy and Srini Ramaswamy outlined how the technology could make bank funding less stable and increase borrowing costs for consumers and businesses. Tokenized deposits are commercial bank deposits represented on a blockchain or distributed ledger, allowing for instant, around-the-clock settlement.