Custodia and Vantage Launch First US Bank-Issued Stablecoin on Ethereum
By: Isha Das
In a groundbreaking development in the digital finance sector, Custodia Bank and Vantage Bank have successfully launched the first US bank-backed stablecoin, Avit, on the Ethereum blockchain. This notable initiative has marked a significant advancement in integrating traditional banking mechanisms with blockchain technology, aiming to modernize the US dollar payments system.
The stablecoin was tested in a series of transactions with a business customer, involving the minting, transferring, and redemption of Avit tokens. These operations were carried out on the Ethereum mainnet using the ERC-20 standard, demonstrating a compliant process for handling stablecoins on a permissionless blockchain. The test transactions represented real-world business-to-business interactions, where the Avit tokens were minted by Custodia Bank, while Vantage Bank handled the fiat reserves backing these tokens. The collaboration assured compliance with necessary regulatory frameworks such as the Bank Secrecy Act (BSA), anti-money laundering (AML), and the Office of Foreign Assets Control (OFAC) rules.
Unlike other stablecoins that operate outside traditional banking frameworks, the Avit project was completed within a regulated banking environment, showcasing that US banks can successfully tokenize demand deposits in compliance with regulatory standards. This initiative not only highlighted the potential of blockchain-based stablecoins to improve transaction efficiency with quick settlement times and reduced costs but also demonstrated their ability to retain the safety net provided by an established banking system.
Both Custodia Bank and Vantage Bank have visions of this pilot serving as a foundation for future payment infrastructures that balance innovation with regulatory compliance. As US policymakers continue to evaluate the place of stablecoins in the financial ecosystem, the Avit stablecoin paves the way for a regulated path in digitalizing currencies, providing lessons for other financial institutions aiming for similar integrations.
