The industry is moving toward instant settlements, but this coin has a flip side. My analysis of recent research shows that the mass adoption of tokenized deposits could radically change banks' funding model, undermining the stability of their resource base and constraining lending. This is not about hypothetical risks, but about very specific figures that give pause.
Tokenized deposits are a digital form of bank liabilities on the blockchain. Unlike stablecoins, they remain within the banking system and can earn interest. It would seem ideal. But it is precisely the speed of such settlements, which everyone praises, that becomes the key problem.
Traditionally, a portion of deposits remains "stuck" in accounts due to technical transfer difficulties and customer loyalty. This allows banks to forecast cash flows. Tokenization destroys these barriers. A client can transfer funds to where rates are higher with a single click, and programmable functions and AI agents automate this process. Imagine smart contracts tracking yields in real time and moving your money between banks without your involvement. For a bank, this turns a stable resource into "hot money."
The domino effect: from stability to shortage
My calculations, based on Dallas Fed modeling, show the scale of the threat. About 80% of U.S. banks' interest rate risk (approximately $5.8 trillion out of $7 trillion) is currently supported by deposit "inertia." If the average deposit lifespan shortens by 10%, banks' ability to absorb this risk would fall by $580 billion (in 10-year asset equivalents). If rate sensitivity to the market rises by 10%, losses would already reach $700 billion.
This does not mean lending would shrink by that amount directly. But it means banks would have to seek more expensive long-term funding, which would inevitably hit the cost of credit for businesses and households.
A new reality: more liquidity, fewer loans
The second blow is to balance sheet structure. If depositors can instantly withdraw large sums, banks will find it harder to forecast outflows. Regulators would likely deem such liabilities less stable, forcing banks to build up holdings of highly liquid assets (reserves, U.S. Treasuries). This would directly reduce the share of funds available for lending to the real economy.
Brazil's Pix instant payment system is a telling example. By Q1 2026, it was used by ~200 million people, with monthly transaction volumes reaching $650 billion. A 2025 Central Bank of Brazil study confirms that increased Pix usage led to larger government bond holdings in banks and reduced credit intermediation. This is not an exact analogue, but a vivid illustration of the trend.
Is delay akin to death?
It is telling that banks themselves are accelerating this process. On August 26, 39 U.S. banking associations created the BankChain alliance, planning to launch a nationwide blockchain network for tokenized deposits in 2027. JPMorgan, Citigroup, Bank of America, and Wells Fargo are already working on their infrastructure through The Clearing House. Meanwhile, HSBC and Standard Chartered conducted the first tokenized deposit transaction on the SWIFT blockchain.
The technology is at an early stage, and the final effect will depend on architecture and rules. But in my professional opinion, banks, by adopting tokenization to boost efficiency, are simultaneously planting a bomb under their own funding model. The question is not whether this effect will occur, but how quickly it will manifest and whether regulators can adapt to the new reality before systemic problems begin.