Custodia Bank and Vantage Bank have completed the first tokenization of U.S. dollar demand deposits by a bank on a permissionless blockchain.
The development introduces Avit, a new U.S. dollar stablecoin, marking a regulatory-compliant breakthrough for blockchain integration within traditional banking.
A March 25, 2025, press release from Custodia Bank explained the complete use of the ERC-20 token standard to execute Avit stablecoin transactions on the Ethereum mainnet. The achievement introduces a new service that functions as a real-time payment rail with low costs and swift confirmation.
Custodia Bank managed a bank customer transaction through eight operation phases covering minting, self-custody, and business-to-business transfer and redemption. Customers maintain their banking compliance inside and outside standard banking operations within this framework.
Vantage Bank handled the fiat reserves supporting the stablecoin and managed payment systems such as Fedwire and ACH. Custodia Bank oversaw token issuance and redemption through its proprietary Avit Management System, which includes blockchain monitoring and reconciliation features.
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Compliance Remains Central to the Stablecoin Framework
Both institutions ensured adherence to regulatory standards under the Bank Secrecy Act, anti-money laundering laws, and Office of Foreign Assets Control requirements. Internal policies and documentation were tailored to meet oversight expectations, differing from approaches used by non-bank stablecoin issuers.
CEO Caitlin Long from Custodia Bank declared that the partnership demonstrated how U.S. banking institutions could distribute blockchain-oriented demand deposits while maintaining compliance standards.
She believed the regulatory environment would progressively support responsible innovation in the future. According to Jeff Sinnott, who leads Vantage Bank as its CEO, payment modernization has reached a pivotal point.
The stablecoins system can boost banking efficiency in international operations by utilizing the United States dollar as the foundation.
Avit Built on Ethereum Amid Cautious Regulatory Messaging
Although Custodia Bank is known for its Bitcoin-friendly stance, the team selected Ethereum as the base layer for Avit due to its mature ecosystem and programmability. The choice raised some reactions in the digital asset space, mainly because the initial announcement did not explicitly mention Ethereum.
The Ethereum blockchain-enabled secure token deployment through its flexible framework that also supported auditing operations. The patented deposit tokens created by Custodia maintain the legal foundation and operational structure of Avit’s system.
When this transaction succeeds, other U.S. banking institutions can establish comparable models. Given the increasing worldwide interest in dollar-backed digital assets, Avit represents a regulatory model through which stablecoin innovation could be adopted across the U.S. financial system.
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