Custodia Bank and Vantage Bank have issued the first US bank-backed stablecoin, called Avit, on a public blockchain network, according to a March 25 press release.
The stablecoin was used in a series of test transactions with a business customer. The pilot included minting, transferring, and redeeming tokens on the Ethereum (ETH) mainnet using the ERC-20 standard.
The move marks the first time dollar demand deposits from regulated banks have been tokenized on Ethereum.
Banks deliver tokenized payments
The series of eight test transactions demonstrated a fully compliant process for minting, transferring, and redeeming stablecoins on a permissionless blockchain.
Avit tokens were created using the widely adopted ERC-20 standard, and the pilot involved real-world business-to-business transfers and redemptions into fiat US dollars.
The move represents a breakthrough in blending blockchain technology with the US banking system at a time of rising global demand for digital dollar payments.
Custodia Bank, based in Wyoming, managed the issuance, custody, monitoring, and reconciliation of the tokens using its proprietary Avit Management System. Meanwhile, Vantage Bank, based in Texas, held the fiat reserves backing the tokens and facilitated traditional settlement services via Fedwire and ACH.
The test involved a bank customer transferring Avit tokens into self-custody, transacting with third parties outside the banking system, and redeeming them back into dollar deposits.
Unlike existing stablecoins that often operate outside the traditional banking perimeter, the Avit pilot was conducted entirely within a regulated banking environment.
Both banks ensured compliance with Bank Secrecy Act (BSA), anti-money laundering (AML), and Office of Foreign Assets Control (OFAC) rules. This required the development of tailored documentation, policies, and procedures that meet federal banking standards — establishing a potential blueprint for other institutions.
Custodia Bank CEO Caitlin Long said:
“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.”
New payment rail
With programmable features, fast settlement times, low transaction costs, and transparent auditability, the pilot revealed the potential of blockchain-based stablecoins to modernize US dollar payments while retaining the safeguards of the banking system.
Vantage Bank CEO Jeff Sinnott called the milestone “a pivotal moment in reshaping the financial landscape,” noting it demonstrates how banks can lead in cross-border payment innovation while reinforcing trust in the American dollar.
The transactions also marked the first use of Custodia’s US patent (No. 11392906), granted in 2022, for the tokenization of bank deposits on permissionless blockchains.
The banks intend for this pilot to serve as a foundation for future real-time, programmable payment infrastructure anchored in the regulatory rigor of U.S. banking law.
As U.S. policymakers continue debating the role of stablecoins in the broader economy, the Avit launch may signal a path forward for dollar digitalization that aligns innovation with oversight.
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