Tokenized deposits—meaning fast and programmable deposits—could make bank funding less stable and ultimately drive up the cost of loans in the US, according to Dallas Federal Reserve economists, as reported by Cointelegraph. They argue that the increased speed of moving funds and automation could push lenders to rely on pricier sources of financing.

Why Bank Funding Could Be at Risk

Faster, programmable settlement makes it easier for deposits to flow out quickly, which weakens the stability of banks’ funding base. When funding becomes less predictable, banks are forced to turn to alternative, more expensive liquidity channels. This shift makes their funding costs more sensitive to short-term market swings.

What This Means for Borrowers

If banks end up relying more on expensive funding, their higher costs will likely translate into pricier loans. The Dallas Fed economists estimate this trend could raise borrowing costs for the entire US economy—from households to businesses.