Tokenised deposits promise faster payments and better liquidity management for bank clients. But the same flexibility could make deposits less useful as a stable funding source for banks, according to new research from the Federal Reserve Bank of Dallas.
In a paper published on Aug. 25, Dallas Fed economists Rosie Levy and Srini Ramaswamy said wider adoption of tokenised deposits could shorten the expected life of bank deposits and make them more sensitive to market interest rates.
Banks use relatively stable deposits to fund longer-term assets, including loans. If clients can move money almost instantly to another bank, money market fund, or higher-yielding alternative, banks may have less room to provide longer and relatively cheap credit.
Faster Money, Less Sticky Deposits
The Dallas Fed paper estimated that a 10% reduction in the expected life of deposits would reduce the US banking system’s capacity to finance long-duration assets by about $580 billion in 10-year equivalents.
A 10% increase in deposit rate sensitivity to market rates would reduce that capacity by about $700 billion, assuming a four-year weighted average life.
The risk comes from the same features banks are now trying to sell. Tokenised deposits can support near-instant settlement, smart-contract automation, and 24/7 liquidity movement. In theory, AI agents and programmable money could also allow deposit balances to move without direct action from the account holder.
- A Token Is Only as Good as the Share Behind It: How Four Crypto Exchanges' SpaceX Bets Came Up Empty
- SEC Clarifies the Rules Around Tokenised Stocks: Will It Encourage US Issuers Now?
- Tokenization and Investing: A Look at Tomorrow's Democratized Landscape
Citi has already positioned Citi Token Services for Cash as a tool for corporate treasury clients.
The bank says the service enables 24/7 liquidity transfers and payments, including a case where a client moved funds between Singapore and the US during Chinese New Year, when local markets were closed.
JPMorgan’s Kinexys Digital Payments also offers JPM Coin, a USD deposit token backed by deposits at JPMorgan and designed for institutional use cases such as payments, collateral and settlement.
Lloyds ran the transaction with tokenised deposits in the Canton Network in January 2026, claiming it was the first time in the UK that tokenised deposits had been issued on a public blockchain.
Not Retail Deposits
The available products are primarily for institutional and corporate clients, helping banks keep payments and liquidity inside the regulated banking system while competing with stablecoins and tokenised money market funds.
The next step may be interoperability. The Wall Street Journal reported that The Clearing House, co-owned by large commercial banks including JPMorgan Chase, Bank of America, Citigroup and Wells Fargo, plans to operate a tokenised deposit network that would connect traditional payment rails with digital asset infrastructure.
That portability also increases risk. A bank gives clients a faster way to move money off its own balance sheet, especially if tokens become usable across institutions and outside the original issuer’s ecosystem.
For now, limited movement between issuers remains one of the main constraints on that risk.
