The Dallas Federal Reserve warned that tokenized deposits could reduce U.S. banks’ capacity to fund long‑term loans by as much as $700 billion if depositors become 10 percent more sensitive to interest‑rate changes. According to estimates from two Dallas Fed economists, tokenized deposits could strip about $700 billion from the system’s ability to hold long‑term interest‑rate risk if deposit outflows accelerate. A separate analysis estimated that a 10 percent earlier withdrawal of deposits could lower banks’ capacity by roughly $580 billion, assuming an average deposit holding period of four years. Tokenized deposits are programmable balances recorded on a blockchain that enable instant settlement and automated switching between banks, reducing the stickiness of traditional deposits. The feature could prompt banks to raise deposit rates, increase holdings of reserves and Treasuries, or rely more heavily on more expensive term debt, potentially raising borrowing costs for consumers and businesses. Early evidence from Brazil’s 2025 study of its instant payment system, Pix, showed that greater use of the platform increased banks’ liquid asset holdings, particularly government bonds, while decreasing credit intermediation and expanding the share of subprime loans in remaining loan books. The Clearing House and banks such as Bank of America, Citi and Wells Fargo are developing an interoperable network to support cross‑bank clearing, automated workflows and 24/7 settlement, aiming to facilitate tokenized deposit transfers. AI tools could automate deposit movement without direct user action, further eroding deposit stability. The estimates underscore a possible shift in banking funding dynamics as tokenization matures.