Dallas Fed Warns Tokenized Deposits Could Reduce U.S. Bank Lending Capacity by $700 Billion

The Federal Reserve Bank of Dallas warns that the rise of tokenized deposits and AI agents could trigger a massive shift in banking liquidity. Economists estimate that if depositors become 10% more sensitive to interest rates due to automated switching, U.S. banks could lose $700 billion in capacity to hold long-term interest rate risks. Even a 10% increase in early deposit outflows could reduce lending capacity by $580 billion. The report highlights that programmable money and smart contracts allow for near-instantaneous capital movement, forcing banks to