Tokenized deposits could reshape bank funding and reduce the amount available for lending, according to researchers at the Federal Reserve Bank of Dallas. The researchers estimate that as much as $700 billion could be drained from bank lending if deposits become faster to move and more sensitive to interest rates. In that environment, banks may shift toward safer assets rather than maintain the same level of lending. The change could constrain credit availability and increase borrowing costs. The warning highlights a potential banking-sector effect of tokenized deposits as they become more responsive to market conditions. The Dallas Fed researchers’ assessment does not provide a forecast for specific crypto assets, but it outlines how changes in deposit behavior could affect banks’ balance sheets and the wider cost of credit.
