Tokenized deposits accelerate: US credit costs may soar due to capital instability

According to Woofun AI, Dallas Federal Reserve economists Rosie Levy and Srini Ramaswamy issued an early warning that token-based deposits may weaken bank capital stability and ultimately drive up US credit costs.

The underlying reason lies in the reshaping of deposit behavior by technology. The instant settlement function gives savers seeking higher returns the ability to quickly switch banks, while the programmable deposit token combines artificial intelligence technology to automate the processing of fund transfers, significantly shortening the time that funds stay in a single account, leading to a significant increase in the sensitivity of deposits to interest rates.

According to data compiled by Woofun AI, if interest rate sensitivity increases by 10%, the ability of banks to hold long-term loans and other assets is expected to drop by about 700 billion US dollars; if deposit retention time is shortened by 10%, this ability may decrease by about 580 billion US dollars. The above values are all 10-year equivalent estimates. They are a scenario analysis rather than an accurate forecast, and are not directly equivalent to a reduction in loan size.

Notably, industry infrastructure is advancing at an accelerated pace to support this transformation. US banks are committed to building a shared blockchain network that aims to process tokenized deposits 24 hours a day without interruption and ensure that funds are within a regulated system. On Tuesday, 39 US state banking associations formed the BankChain Alliance to create a nationwide network that supports tokenized deposits, stablecoins, and automated settlement.

Meanwhile, Clearing House is building an independent network supported by JPMorgan Chase (JPM.US), Bank of America (BAC.US), Citibank (C.US), New York Mellon (BK.US), and Chase Bank (JPM.US). System interconnection is also underway. On August 20, Standard Chartered Bank (SCBFY.US) and HSBC Bank (HSBC.US) completed a cross-border transaction through the SWIFT blockchain ledger to record the parties' obligations before settling the existing payment infrastructure.

Faced with increased deposit instability, banks need to adjust their liquidity strategies. Levy and Ramaswamy pointed out that banks can increase their holdings of highly liquid assets such as reserves and US Treasury bonds, or rely more on term debt to maintain loan business, but financing through wholesale debt is likely to increase credit costs for consumers and businesses. Referring to Brazil's Pix instant payment system, a 2025 study showed that its widespread application increased banks' liquid asset holdings while reducing credit intermediation links, which provided an international reference for the potential impact of tokenized deposits.