Tokenization lets corporate treasurers move bank deposits faster and outside conventional banking hours.
Commercial deposits provide banks with funding while supporting payments, treasury and credit relationships.
The Kansas City Fed said tokenized deposits require banks to prepare for faster, round-the-clock and less consistent outflows.
Banks are developing tokenized deposits to give corporate customers faster access to their money. In doing so, they are making the deposits they use for funding easier to move.
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A research briefing from the Federal Reserve Bank of Kansas City published Friday (Oct. 16) examined the implications for bank liquidity as tokenized deposits move toward commercial use.
Tokenized deposits remain commercial bank deposits, but their digital representation allows transfers on distributed-ledger infrastructure outside conventional banking and settlement schedules. The Kansas City Fed said in the briefing that most demand appears to come from multinational corporate treasurers interested in always-on liquidity management capabilities, international supplier payments and the cash side of tokenized securities transactions.
Banks will have to prepare for “faster, round-the-clock, and less consistent deposit outflows,” the briefing said. Tokenization could also create changes in deposit “stickiness” and the traditional division between operational deposits used for everyday business and nonoperational balances.
Banks value commercial operating deposits as a source of funding and as the basis for broader relationships across payments, treasury management and credit. The longer and more consistently those balances remain at a bank, the more dependable they are as a funding source.
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