Custodia Bank and Vantage Bank Launch Avit: The First US Bank-Backed Stablecoin
Custodia Bank and Vantage Bank have made headlines by launching Avit, the first bank-backed stablecoin in the United States, based on a public blockchain network. Announced in a press release dated March 25, this groundbreaking development signifies a monumental step in merging traditional banking with cutting-edge blockchain technology. The introduction of Avit comes at a time when digital dollar payments are seeing increased global demand, signaling a new era in the financial landscape.
The pilot program entailed a series of eight test transactions that successfully showcased the stability and compliance of the Avit stablecoin on the Ethereum mainnet. By utilizing the ERC-20 standard for token creation, both banks demonstrated a compliant process for minting, transferring, and redeeming tokens. This initial testing phase included real-life business-to-business transfers and redemptions back into fiat US dollars, effectively creating a fully functional ecosystem for the stablecoin.
Through this pilot, Custodia Bank was responsible for the issuance and custody of the tokens, employing its proprietary Avit Management System for monitoring and reconciliation. Vantage Bank, on the other hand, played a crucial role in holding the fiat reserves that back Avit and facilitating conventional settlement services, including Fedwire and ACH transactions. What sets this project apart from existing stablecoins is that it operates entirely within a regulated banking environment, ensuring compliance with federal regulations, including the Bank Secrecy Act (BSA), anti-money laundering (AML), and Office of Foreign Assets Control (OFAC) rules.
Custodia Bank’s CEO Caitlin Long commented on the significance of this project, stating, "We broke ground on the legal and regulatory front, proving that US banks can collaborate to tokenize demand deposits on a permissionless blockchain in a regulatorily compliant manner.” This collaboration showcases the pivotal role banks can play in the digital currency space, reinforcing the established safety and regulatory frameworks that characterize the traditional banking system.
Avit is designed with programmable features that enhance settlement times, reduce transaction costs, and provide transparent auditability of digital transactions. Both Custodia and Vantage Bank view the pilot as a significant step toward establishing a modernized payment infrastructure anchored in the rigorous regulatory environment of U.S. banking law. Vantage Bank’s CEO, Jeff Sinnott, heralded this initiative as a “pivotal moment in reshaping the financial landscape,” reflecting a strong commitment to innovation in cross-border payments while maintaining trust in the American dollar.
Additionally, the transactions conducted during the test phase also marked the inaugural use of Custodia’s U.S. patent (No. 11392906) for bank deposit tokenization on permissionless blockchains, further underscoring the innovative nature of this project. As discussions continue among U.S. policymakers regarding the role of stablecoins, the launch of Avit could pave the way for deeper digitalization of the dollar that aligns fintech innovation with regulatory compliance.
With Avit’s development, Custodia Bank and Vantage Bank have established a benchmark for future initiatives aiming to integrate traditional banking with blockchain technology. By functioning within a compliant framework and demonstrating the operational viability of tokenized payments, they have taken significant strides toward transforming the landscape of digital payments. As other institutions contemplate similar ventures, the Avit pilot serves as a valuable blueprint for blending innovation with the stability and assurance that regulation provides.
