Tokenized deposits could materially reduce U.S. banks’ ability to absorb long-term interest-rate risk, according to estimates from Dallas Fed economists Rosie Levy and Srini Ramaswamy. Their study found that if tokenized deposits make depositors 10% more sensitive to interest rates, the banking industry’s capacity to support long-term loans and securities could fall by about $700 billion. If tokenization leads 10% of deposits to leave earlier than expected, that capacity could decline by about $580 billion. The analysis assumes deposits remain in banks for an average of four years. The economists said “other deposits,” excluding large-denomination time deposits, currently support $5.8 trillion of the roughly $7 trillion in long-term interest-rate risk exposure across the U.S. banking industry. They added that instant settlement and programmability could let depositors or AI agents shift funds between banks more quickly, potentially forcing banks to raise deposit rates, hold more reserves, or rely more on term debt, increasing credit costs for consumers and businesses.