Tokenized Deposits Could Force Up Credit Costs

Tokenized deposits—commercial bank liabilities represented on distributed ledgers—offer programmable transactions and 24/7 settlement. While these features modernize banking, they also threaten the behavioral stability that banks rely on to finance long-term assets like mortgages and business loans. If customers or AI agents can shift capital between banks with a single click, the practical barriers that currently keep deposits in place will erode.

Economists Rosie Levy and Srini Ramaswamy estimate that if deposit life shortens by 10%, the system’s maturity transformation capacity could drop by roughly $580 billion. To mitigate these risks, banks may be forced to offer higher deposit rates to retain customers, compress lending margins, or issue more expensive wholesale debt. The latter would likely increase the cost of credit for borrowers across the economy.

Large institutions, including JPMorgan, Bank of America, and Citi, are currently building the infrastructure to support these networks. The BankChain Alliance, representing 39 state banking associations, is also targeting a 2027 launch. While these systems aim to improve payment efficiency, their design will ultimately dictate how aggressively deposits chase yields. Evidence from Brazil’s Pix instant-payment system suggests that banks may respond to such volatility by holding more liquid government bonds and reducing their overall loan portfolios.