Economists Rosie Levy and Srini Ramaswamy at the Federal Reserve Bank of Dallas estimated that tokenized deposits, by enabling instant and programmable transfers, could make bank funding more volatile. According to their analysis, a 10% increase in deposit sensitivity to interest rates would reduce banks’ capacity to hold loans and other assets by approximately $700 billion. Thirty-nine US state banking associations formed the BankChain Alliance to develop a nationwide tokenized deposit network, while banks including JPMorgan Chase, Bank of America, Citi, BNY and Wells Fargo are working on a separate network via The Clearing House. Banks could respond by holding more liquid assets and relying more heavily on term debt, which could raise credit costs for households and businesses.
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