In a first for the U.S. banking sector, Custodia Bank and Vantage Bank have completed the tokenization of dollar demand deposits on a public blockchain, using Ethereum and the Avit stablecoin.
The series of transactions, executed under full regulatory compliance, marks the activation of a new U.S. dollar payment rail at a time of rising global interest in digital dollar instruments.
The banks issued, transferred, and redeemed Avit stablecoins—designed to represent U.S. dollar demand deposits—on Ethereum’s mainnet using the ERC-20 standard. Eight sequential transactions involved the full cycle: minting Avit tokens, customer self-custody, business-to-business token transfers, and redemptions back into U.S. dollar deposits.
Vantage Bank managed the fiat reserves and traditional banking services such as Fedwire and ACH transfers. Custodia Bank handled blockchain-specific functions, including token issuance and redemption, custody, transaction monitoring, and reconciliation through its proprietary Avit Management System.
The process was executed under Bank Secrecy Act (BSA), Anti-Money Laundering (AML), and Office of Foreign Assets Control (OFAC) standards.
Both banks reported improvements in transaction speed, cost, programmability, and auditability. According to Custodia CEO Caitlin Long, the project proves that U.S. banks can tokenize demand deposits on permissionless blockchains “in a regulatorily-compliant manner.” She called the pilot a legal and regulatory breakthrough and urged for a reversal of policies she says have hindered stablecoin development.
Vantage Bank CEO Jeff Sinnott characterized the development as a turning point for the banking sector.
“By executing this transaction, we’re empowering banks to lead responsibly in cross-border modernization, while also leveraging the strength of the U.S. Dollar and demonstrating regulators’ support for responsible innovation,”
Sinnott said.
The test transactions utilized Custodia’s patent for tokenizing U.S. dollar deposits on permissionless smart-contract blockchains, U.S. Patent No. 11392906, granted in July 2022. All processes were developed in close coordination with banking regulators, with both institutions designing new documentation, policies, and procedures to meet the distinct requirements of blockchain-based financial operations.
Avit’s technical features—low cost, near-instant settlement, and programmability—are integrated with traditional banking oversight. While stablecoins have gained traction globally, this marks the first instance of U.S. demand deposits being tokenized and transacted on a permissionless blockchain under the oversight of regulated banks.
