Tokenized deposits could reduce U.S. banks' capacity to bear long-term interest rate risk by $700 billion

Odaily News: Dallas Fed economists Rosie Levy and Srini Ramaswamy estimate that if tokenized deposits increase depositors' sensitivity to interest rates by 10%, U.S. banks' capacity to bear interest rate risk from long-term loans and securities could decline by approximately $700 billion. If tokenized deposits lead to a 10% early outflow of deposits, that capacity could fall by roughly $580 billion. The study is based on the assumption that deposits remain on average for four years. Currently, "other deposits," excluding large certificates of deposit, support $5.8 trillion of the approximately $7 trillion in long-term interest rate exposure held by the U.S. banking sector.