Dallas Fed Research Suggests Tokenized Deposits May Weaken Bank Liquidity

Researchers at the Dallas Federal Reserve Bank have indicated that tokenized deposits and 24/7 instant blockchain transfers could weaken bank liquidity and limit their ability to issue long-term loans. The study points out that approximately 80% of the $7 trillion in term risk borne by U.S. banks is supported by the term characteristics of traditional deposits. If the weighted average maturity of deposits shortens by 10%, the banking system's term transformation capacity could decrease by about $580 billion, potentially increasing liquidity risks and pressures for capital outflows. Chris Turner, co-founder of Kula, stated that the speed of token transfers does not equate to the legal settlement of underlying financial claims. Although tokens can be transferred through blockchain networks in seconds, payments, ownership, and legal claims still rely on banks, custodians, clearing systems, and regulatory registries for settlement.

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