$580 billion of lending capacity — the price of instant depositsA bank lives off money sitting in accounts for a long time and reacting slowly to rates: that is the only reason short deposits turn into long loans. A deposit in token form breaks both props — moving to a better yield takes an instant, and with a programmable account it takes no owner.
Widespread adoption of tokenized deposits could have meaningful consequences for banks, but there may be broader implications too
— Dallas Fed
The arithmetic: 80% of banks’ interest-rate risk rests on the properties of deposits. Shorten their expected life by a tenth and $580 billion of capacity to fund long assets is gone; raise their rate sensitivity by a tenth and another $700 billion goes with it.
Brazil is the live example: Pix reached 200 million active users, and the heavier customers use it, the less their bank lends.
#analysis
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