Odaily Planet Daily report: Economists Rosie Levy and Srini Ramaswamy of the Dallas Fed estimate that if tokenized deposits increase depositors’ sensitivity to interest rates by 10%, the U.S. banking sector’s capacity to absorb interest rate risk on long-term loans and securities could decline by approximately $700 billion; if tokenized deposits cause a 10% early withdrawal of deposits, this capacity could fall by about $580 billion. The study is based on the assumption that deposits are held for an average of four years, and currently, “other deposits,” excluding large time deposits, support $5.8 trillion of the $7 trillion in long-term interest rate exposure faced by the U.S. banking sector.
Tokenized deposits may reduce U.S. banks' interest rate risk capacity by $70 billion.
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Summary
Tokenized deposits could reduce U.S. banks' interest rate risk exposure by up to $70 billion, according to Dallas Fed economists. A 10% increase in depositors’ sensitivity to interest rates could trigger this decline. If 10% of tokenized deposits are withdrawn early, the reduction could reach $58 billion. The study assumes a four-year average retention period and excludes time deposits. Open interest in other deposits currently supports $5.8 trillion of the $7 trillion in long-term interest rate risk exposure.
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