Custodia & Vantage Bank’s Test of the First Bank-Issued Stablecoin
Hey Digital Banking Fanatic!
A new chapter in U.S. banking is unfolding as Custodia Bank and Vantage Bank collaborate on a stablecoin project designed to bridge traditional finance and blockchain technology.
This initiative, which Custodia describes as the “first bank-issued stablecoin” on a permissionless blockchain, marks a potential shift in how banks interact with digital assets.
At the core of the test is the Avit stablecoin, a dollar-pegged token issued and redeemed on the Ethereum mainnet using the ERC-20 standard. Unlike USDT or USDC, which are issued by non-bank entities and backed by cash equivalents, Avit is fully backed by deposits held at regulated banks.
"All parties to the series of test transactions observed several efficiencies, including low transaction costs, fast transaction settlement, programmability and auditability within a safe, compliant and regulated banking environment," Custodia and Vantage wrote.
Custodia’s role in digital finance has been anything but conventional. Operating as a Wyoming Special Purpose Depository Institution (SPDI), the bank maintains full-reserve backing for customer deposits—an uncommon model in traditional banking. Its legal battles, including a lawsuit against the Federal Reserve over denied access to the Fed’s payment systems, underscore the regulatory hurdles crypto-native banks face.
As stablecoin interest grows, recent moves by Stripe and MoonPay signal the industry’s expanding reach. Regulation remains a focal point, with the Trump administration’s past openness to crypto still influencing discussions while lawmakers weigh rules for bank-issued tokenized deposits. Amid this uncertainty, Custodia’s test stands as a case study in how banks might navigate blockchain finance, adding another dimension to the ongoing debate.
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