Tokenized Deposits Could Raise Credit Costs
Dallas Fed economists warn that programmable deposits could make bank funding less stable and raise borrowing costs.
The update
Two Dallas Fed economists say programmable deposits and AI agents could make bank funding less stable. Faster settlement and automated transfers would allow customers to chase higher yields by switching banks almost instantly. This could reduce the “stickiness” of deposits, making them more sensitive to interest rates and more likely to move quickly.
Why it matters
Reduced deposit stability could force banks to hold more liquid assets, like reserves and U.S. Treasurys, rather than long-term loans. The economists estimate that a 10% increase in deposit-rate sensitivity could cut banks’ capacity to manage interest-rate risk by about $700 billion in 10-year-equivalent terms. A 10% reduction in deposits’ weighted average life could reduce that capacity by about $580 billion. These figures are scenarios, not forecasts, and do not represent direct reductions in lending.
What to watch
Banks are already building shared blockchain networks to support tokenized deposits and stablecoins. A BankChain Alliance of 39 state banking associations and a separate network backed by major banks are under development. The Dallas Fed analysis comes as regulators consider guidance for tokenized deposit insurance and stablecoins.
Sources
- cointelegraph.com — Economists' analysis of programmable deposits and AI agents
- decrypt.co — $700 billion and $580 billion capacity reduction figures
- coindesk.com — Context on programmable deposits and AI agents