The mass adoption of tokenized deposits could radically transform the funding model of banks. The key risk I see in this scenario is the loss of predictability of the resource base. Instant transfers between credit institutions, which the technology enables, could undermine deposit stability and, consequently, constrain lending. This is the conclusion reached by economists Rosy Levy and Shrini Ramaswamy of the Federal Reserve Bank (FRB) of Dallas.
Tokenized deposits are a digital form of bank liabilities placed on a distributed ledger. Unlike most stablecoins, they remain within the traditional banking system and can generate interest income for their holders. The technology promises real-time settlements, but it is precisely this feature that, in my view, harbors a hidden threat.
Effect of up to $700 billion: the math of risk
Today, a significant portion of deposits remains relatively stable due to customer inertia and technical barriers to quickly moving funds. These balances allow banks to forecast the horizon over which money stays on their balance sheets. Tokenization removes these obstacles: a customer could instantly transfer funds to where rates are higher, and programmable functions and AI agents would automate this process without the owner's involvement.
Levy and Ramaswamy assessed the consequences of such a behavioral shift. According to their calculations, about 80% of the interest rate risk that U.S. banks take on when placing long-term assets is supported by the current characteristics of deposits. This is equivalent to approximately $5.8 trillion of the total $7 trillion in such exposure. If the average duration of deposits on balance sheets shortens by 10%, banks' ability to take on interest rate risk would decrease by roughly $580 billion in 10-year asset equivalents. A 10% increase in the sensitivity of deposit rates to market rates would produce an even more significant effect—about $700 billion.
It is important to understand: these figures do not mean a direct reduction in lending by the stated amounts. Rather, they refer to a decline in banks' capacity to hold assets with interest rate risk after conversion to a 10-year Treasury equivalent. Part of the effect could be offset by attracting longer-term funding, but such debt typically costs more than deposits. As the authors note, "this will likely negatively affect the cost of lending for consumers and businesses."
Structural changes and lessons from Brazil
Another consequence is a shift in the structure of bank balance sheets. If tokenized deposits allow customers to withdraw significant sums almost instantly, forecasting daily outflows will become more difficult. In stress scenarios, regulatory models may begin to view such liabilities as less stable. As a result, banks would need to increase their holdings of highly liquid assets—primarily reserves and U.S. Treasuries—which would reduce the share of funds available for lending to businesses and households. The overall size of the system's deposit base would not necessarily shrink—money would simply move faster between institutions, creating risk for each individual bank.
As an analogy, the authors examine Brazil's instant payment system Pix. By the first quarter of 2026, it had about 200 million active users, with monthly transaction volumes reaching approximately $650 billion. A 2025 study by the Central Bank of Brazil showed that more intensive use of Pix was accompanied by an increase in banks' holdings of liquid assets and a decline in credit intermediation. Although Pix is not a perfect analogue to tokenized deposits, both technologies enable nearly instant interbank transfers, so the Brazilian experience offers valuable insight into potential consequences.
Banks accelerate tokenization
The analysis comes amid an acceleration of bank projects involving tokenized money. On August 26, 39 U.S. state banking associations created the BankChain alliance, which plans to launch a nationwide blockchain network supporting tokenized deposits and stablecoins in 2027. In June, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo announced the creation of their own infrastructure for bank on-chain money through The Clearing House. And on August 19, HSBC and Standard Chartered conducted the first real interbank transaction with tokenized deposits on SWIFT's blockchain infrastructure.
The direction is still in its early stages, and the final consequences will depend on system architecture and the rules of interaction between banks. However, my professional conclusion is unequivocal: regulators and banks need to prepare in advance for a new reality where the speed of money movement becomes the main challenge to the traditional model of banking intermediation.