Banks Launch Hybrid Token to Counter Stablecoin Dominance

Custodia Bank and Vantage Bank Texas have launched a blockchain platform enabling traditional banks to issue tokenized deposits and stablecoins, positioning themselves at the forefront of a rapidly evolving financial landscape. The patent-protected system, which integrates tokenized deposits and GENIUS Act-compliant stablecoins into existing online banking infrastructure, allows banks to maintain control over digital wallets while leveraging blockchain's efficiency and security, according to a Coinotag article. This innovation bridges traditional finance and crypto by using a single token that functions as both a deposit and a stablecoin, addressing concerns about disintermediation and regulatory compliance, as reported in a Decrypt report.

The platform, which builds on Custodia's July 2025 milestone as the first U.S. bank to issue tokenized deposits on a permissionless blockchain, aims to counter the growing dominance of private stablecoin issuers. With the stablecoin market projected to expand from $300 billion today to $2 trillion by 2028, per U.S. Treasury estimates, the Coinotag article notes banks face mounting pressure to adopt digital solutions to retain deposits and compete in a digitized economy. The GENIUS Act, signed into law in July, has further accelerated this shift by providing a regulatory framework for tokenized assets, ensuring compliance with banking laws while fostering innovation, according to a TradingView report.

The technology underpinning the platform combines Custodia's blockchain infrastructure with Infinant's Interlace network, enabling seamless conversions between tokenized deposits and stablecoins. A patent-pending protocol uses on-chain oracles and off-chain controls to switch tokens between regulatory statuses without redeeming or altering them, as Decrypt reported. This flexibility allows tokens to function as FDIC-insured deposits within banks and as stablecoins when transferred to other institutions or wallets, preserving regulatory safeguards while enabling real-time settlements. Early applications include cross-border payments, supply chain financing, and payroll systems, demonstrating the platform's versatility across sectors, according to a CryptoTimes article.

Regulatory approval remains a critical next step. While the system has completed pilot testing, Custodia CEO Caitlin Long confirmed that the platform awaits final authorization to scale operations, per earlier Decrypt coverage. This aligns with broader industry trends, as regional banks increasingly seek to integrate blockchain solutions to enhance operational efficiency and customer offerings. For example, SouthState Bank Corporation recently maintained a $0.60-per-share dividend amid strong Q3 2025 results, signaling confidence in its ability to navigate a competitive landscape, according to a StreetInsider report.

The launch underscores a strategic shift in the banking sector, where institutions are leveraging technology to address disintermediation risks and regulatory challenges. By offering a turnkey solution for tokenized deposits, Custodia and Vantage aim to empower banks of all sizes to participate in the digital asset ecosystem without overhauling their existing systems, as noted in a CoinMarketCap report. As adoption grows, the platform could catalyze a parallel payments network operating within traditional banking frameworks, enabling smaller institutions to compete with larger players on efficiency and programmability, a point Decrypt also observed.