Tokenized Deposits Could Raise Borrowing Costs, Fed Economists Warn

Tokenized deposits could raise borrowing costs, Fed economists warn

Dallas Fed economists estimate tokenized deposits could reduce banks’ duration capacity by $700 billion if depositors become more rate sensitive.

Dallas Fed warns tokenized deposits could strip $700 billion from U.S. banks' lending capacity

Tokenized Deposits Could Drain $700 Billion From Bank Lending, Dallas Fed Warns

A shift toward faster, more rate-sensitive deposits could push banks into safer assets, constrain lending, and raise borrowing costs, Dallas Fed researchers said.

Dallas Fed warns tokenized deposits could squeeze bank lending

The Federal Reserve Bank of Dallas warned that each new entry into the recently popular tokenized deposits sheds from banks’ ability to fund loans for households and businesses when it weighed in on the stablecoins vs. tokenized deposits debate. The paper by the Dallas apex bank returned three key areas where tokenized deposits will impact banks’ businesses and trickle into the economy: 80% of the duration risk taken by banks ($5.8 trillion 10-…

Banks Sell Tokenised Deposits as Fast Money, but the Strategy May Backfire

Tokenised deposits promise faster payments and better liquidity management for bank clients. But the same flexibility could make deposits less useful as a stable funding source for banks, according to new research from the Federal Reserve Bank of Dallas. In a paper published on Aug. 25, Dallas Fed economists Rosie Levy and Srini Ramaswamy said wider adoption of tokenised deposits could shorten the expected life of bank deposits and make them mor…