American banks Custodia Bank and Vantage Bank successfully completed the tokenization of U.S. dollar deposits by issuing the Avit stablecoin on the Ethereum blockchain.
Custodia Bank and Vantage Bank announced the successful testing of deposit tokenization on a permissionless blockchain network. As part of the trial transactions, the Avit banking stablecoin was issued, transferred, and redeemed.
During the testing, Avit tokens were minted on the Ethereum blockchain using the ERC-20 standard. Vantage Bank managed the fiat reserves of the stablecoin and acted as a service provider for Fedwire and ACH payment systems. Custodia Bank was responsible for issuing and redeeming tokens, custodial storage services, transaction monitoring, and reconciliation through its proprietary Avit management system. The test transactions included transferring Avit to a customer, business transactions outside the banking system, and the return of tokens for redemption.
Both financial institutions strictly adhered to all U.S. regulatory requirements and closely cooperated with regulators throughout the testing process. According to Caitlin Long, CEO of Custodia Bank, in addition to complying with standard requirements under the Bank Secrecy Act (BSA), anti-money laundering (AML) laws, and counter-terrorist financing (CFT) regulations, a set of policies and procedures was developed that differs from those used by U.S. stablecoin issuers. The issuance of the Avit stablecoin was made possible by a patent granted to Custodia Bank in July 2022 for the tokenization of U.S. dollar bank deposits. Long believes the bank’s legal efforts will help remove regulatory barriers to stablecoin adoption in the U.S.
Many TradFi companies are interested in issuing banking stablecoins. Back in 2023, Japan successfully tested the DCJPY banking stablecoin, while Australia launched AUDN. In 2024, major European banking institutions were expected to introduce assets to compete with stablecoins from Tether and Circle.
