US banks eye own blockchain as tokenized deposits pose threat

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7. US banks eye own blockchain as tokenized deposits pose threat

U.S. banks could face a new threat to their lending capacity from tokenized deposits, so banks are looking to get with the program by launching their own blockchain.

While banks continue to push for changes to the stablecoin language in the Senate’s digital asset market structure legislation (the CLARITY Act) that they claim would reduce their ability to issue new loans, a new report by the Federal Reserve Bank of Dallas says tokenized deposits could pose similar risks.

That report, Tokenized deposits could affect bank liquidity, maturity transformation, argues that “stablecoins and tokenized deposits differ in important ways that could pose meaningful consequences for the banking sector.”

While banks have been far more welcoming of tokenized deposits than stablecoins, the report warns that “significant tokenized deposit adoption could meaningfully affect bank maturity transformation, which may impact availability of credit for households and businesses, and liquidity management.”

Dividing bank deposits into operational and nonoperational silos, the report’s authors say operational deposits (core funds needed for clearing, custody, or cash management) are “stickier for liquidity management purposes.” Bank customers utilizing a variety of bank services are “less likely (or less able) to rapidly withdraw” these operational balance deposits, leading to lower interest rates and longer lifespans.