Dallas Fed: Tokenized Deposits May Cut Bank Lending $700B

Dallas Fed analysis shows tokenized deposits could drain $700 billion from bank lending as institutions shift reserves into programmable on-chain instruments. The warning highlights how this migration compresses traditional credit creation while accelerating settlement efficiency across payment rails. Banks face immediate pressure on net interest margins as deposit bases fragment, forcing faster adoption of tokenized treasury products to retain liquidity. This dynamic echoes prior shifts in money market funds yet operates at far greater scale given real-time atomic settlement capabilities.