Dallas Federal Reserve economists Roni Levy and Srini Ramaswamy are sounding the alarm: if tokenized deposits go mainstream, they could seriously disrupt how banks fund themselves. Their analysis suggests that lightning-fast transfers between institutions could make funding bases less stable and put the brakes on lending.

Dallas Fed Economists Weigh in on the Risks

The big worry? Instant movement of funds between players in the financial system makes bank liabilities way more "mobile." That means banks’ funding is more sensitive to shifts in demand—and that could make banks think twice before extending new loans.

What Are Tokenized Deposits?

Tokenized deposits are basically digital versions of bank liabilities, issued and managed on distributed ledger infrastructure. In plain English, it’s your regular deposit, but tokenized and able to move around on digital rails.

How Are They Different from Stablecoins?

Unlike most stablecoins, tokenized deposits stay within the traditional banking system and can actually earn interest for holders. So even though they use distributed ledger tech, they’re still tightly connected to the old-school financial world.

Potential Impact on Lending

If tokenized deposits catch on in a big way, the ability to instantly reallocate funds between banks could make funding less sticky. The economists warn that in this scenario, banks could find it harder to ramp up lending—potentially slowing down credit growth across the board.