Custodia, Vantage Banks Launch First US Bank-Backed Stablecoin Avit on Ethereum

Custodia Bank and Vantage Bank have made history by issuing the first US bank-backed stablecoin, named Avit, on the Ethereum blockchain. This groundbreaking development was announced in a press release on March 25. The stablecoin was put to the test through a series of transactions with a business customer, demonstrating the minting, transferring, and redeeming of tokens on the Ethereum mainnet using the ERC-20 standard. This marks the first instance where dollar demand deposits from regulated banks have been tokenized on Ethereum.

The pilot project involved eight test transactions, showcasing a fully compliant process for handling stablecoins on a permissionless blockchain. Avit tokens, created using the ERC-20 standard, were used in real-world business-to-business transfers and redemptions into fiat US dollars. This initiative represents a significant step in integrating blockchain technology with the US banking system, addressing the growing 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. 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 the 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 highlighted the significance of this achievement, stating that it proves US banks can collaborate to tokenize demand deposits on a permissionless blockchain in a regulatorily compliant manner.

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 described the milestone as a pivotal moment in reshaping the financial landscape, demonstrating 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 for the tokenization of bank deposits on permissionless blockchains, granted in 2022.

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. This development underscores the potential for stablecoins to revolutionize the financial industry by offering programmable features, fast settlement times, low transaction costs, and transparent auditability, all within a regulated framework.