Widespread adoption of tokenized deposits could increase the mobility of bank funds, change liquidity management, and limit banks’ ability to finance long-term loans, according to economists at the Federal Reserve Bank of Dallas.
Economists at the Dallas Fed’s Research Department, Rosie Levi and Srini Ramaswamy, assessed the potential impact of deposit tokenization on bank balance sheets. Their estimates showed that a 10% reduction in the average time deposits remain at banks could reduce the U.S. banking system’s aggregate capacity to take on interest-rate risk by about $580 billion in 10-year asset equivalents. A 10% increase in the sensitivity of deposit rates could reduce that capacity by about $700 billion.
Tokenized deposits are viewed by banks as one possible response to the growth of the stablecoin market. Unlike stablecoins, they remain liabilities of regulated banks and can pay interest to holders. For these instruments to gain widespread adoption, however, banks need to make them transferable beyond the infrastructure of a specific issuer. Financial institutions are already exploring models based on consortia and banking associations.
The economists identified the removal of some existing barriers to moving money between banks as a key risk. Instant settlement allows customers to transfer funds with virtually no delay to wherever higher yields are available. AI agents and smart contracts embedded in deposit tokens could eventually automate this process.
As a result, deposits could become less stable and more sensitive to changes in interest rates. This directly affects maturity transformation, or banks’ ability to finance relatively long-term assets with their deposit base.
The report’s authors calculated that the longer funds remain on deposit and the less depositors respond to changes in rates, the more stable this funding is for a bank. For example, if funds remain on deposit for an average of 5 years and deposit rates have a 30% sensitivity to market rates, the effective duration is 3.5 years. If sensitivity rises to 70%, the figure falls to 1.5 years.
Based on Federal Reserve data as of July 15, 2026, the banking sector’s total interest-rate exposure was estimated at about $7 trillion in 10-year instrument equivalents. According to the authors’ calculations, about $5.8 trillion, or 80% of banks’ total interest-rate risk, is supported by a relatively stable deposit base. On average, banks can rely on these funds as a source of financing for about 2.8 years. The calculations assume that deposits remain at a bank for an average of about 5 years and that deposit rates respond to about 44% of changes in market interest rates.
If tokenization shortens the time funds remain in accounts or makes depositors more sensitive to rates, banks could offset the change in their liability structure by issuing more term debt. Such funding is more expensive than deposits, however, so maintaining the same lending structure under this scenario could raise borrowing costs for businesses and consumers.
A second consequence could be increased bank demand for highly liquid assets. The ability to transfer tokenized deposits around the clock and with virtually instant settlement increases the potential volatility of balances and makes outflows harder to predict. To meet liquidity requirements and pass stress tests, banks would then need to hold more reserves and U.S. Treasury securities.
Brazil’s experience with the Pix instant payment system offers an indication of the potential scale of the effect. Launched in 2020, the system had about 200 million active users by the first quarter of 2026, while monthly transaction volume reached about $650 billion, equivalent to about 25% of the country’s annual GDP. Research based on Pix’s first years of operation found that more intensive customer use of instant transfers was accompanied by increased bank holdings of liquid assets, primarily government bonds, and a decline in credit intermediation.
Tokenized deposits remain at an early stage of development in the U.S. Tokenized securities and collateral are developing in parallel, while stablecoins and tokenized money market funds could compete with banks’ deposit tokens.
Dallas Fed economists estimated that widespread adoption of the technology could have implications beyond the management of individual bank balance sheets. Changes in deposit behavior could affect the cost and availability of credit, monetary policy transmission, existing payment systems, and liquidity requirements. The impact could vary depending on a bank’s size and business model.
Previously, analysts at the International Monetary Fund (IMF) found that the adoption of tokenization could fundamentally transform the traditional financial system. Meanwhile, major U.S. banks and Visa are building settlement networks for tokenized deposits. Read more about why banks are interested in adopting tokenized deposits in the opinion column.
