Key Points
- Tokenized deposits could facilitate quicker fund transfers for better yields.
- A 10% rise in deposit-rate sensitivity might lead to a $700 billion reduction in banks' interest-rate risk capacity.
- Global banks are already experimenting with tokenized deposits and 24/7 settlement systems.
A recent report from the Dallas Federal Reserve indicates that while tokenized deposits can enhance payment speed, they may also lead to reduced stability in bank funding.
The report, released on Tuesday, analyzes the potential effects of widespread adoption on bank liquidity and maturity transformation, which refers to using readily available deposits to finance long-term loans.
Myriad: What's next for crude oil? Make your prediction.The report states, "The growing use of distributed ledger technology—most notably blockchain—has enabled a digital payment infrastructure that supports real-time settlement. The rise of stablecoins has attracted attention, bolstered by initiatives to create regulatory frameworks in the U.S. and globally. In contrast, tokenized deposits have not received as much scrutiny."
Unlike stablecoins like USDT and USDC, tokenized deposits are regulated and can generate interest. However, the report suggests that features like instant settlement and smart contracts, along with agentic AI, could incentivize customers to seek higher yields, diminishing the barriers that typically keep deposits stable.
According to the report, "Sticky deposits depend partly on the frictions that prevent quick transfers between banks. Instant settlement would enable depositors focused on yield to switch banks almost instantly."
Increased outflows and heightened interest rate sensitivity could push banks to be less inclined to maintain long-term, fixed-rate assets. The Dallas Fed estimates that a 10% rise in deposit-rate sensitivity could diminish banks' capacity for managing interest-rate risks by approximately $700 billion in terms equivalent to 10 years.
Additionally, the authors project that a 10% decrease in the average life of deposits could lead to a $580 billion reduction in the banking system's ability to transform maturities.
They added, "Alternatively, banks might attempt to keep their lending composition stable by adjusting their liabilities in other ways. This could lead to increased dependence on term debt issuance; consequently, the economics of such lending, funded by wholesale debt, would likely resemble those of non-bank financial institutions, potentially raising the cost of credit for consumers and businesses."
Myriad: When will Bitcoin hit a new all-time high? Make your prediction.This report is part of a growing trend among banks to explore tokenized payment solutions.
In October 2025, Custodia and Vantage launched a U.S. tokenized-deposit network. By February 2026, Barclays was investigating the potential for tokenized deposits and stablecoin transactions, while BMO announced plans for 24/7 tokenized cash settlements with CME Group and Google Cloud in March.
Most recently, in July, Swift, the global payments network, revealed a pilot program that would enable 17 international banks to transfer tokenized deposits outside traditional banking hours, though final settlements would still depend on existing payment systems operational during business hours.