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- Custodia Bank and Vantage Bank launch Avit, the first stablecoin backed by U.S. dollar demand deposits on a permissionless blockchain.
- Avit introduces a new U.S. dollar payment system for real-time, programmable transactions between bank customers.
- This initiative signals a significant step for traditional banks embracing blockchain technology and stablecoins.
Custodia Bank and Vantage Bank have together launched America’s first stablecoin that is directly backed by U.S. dollar demand deposits on a permissionless blockchain.
The stablecoin, named Avit, has been deployed on the Ethereum mainnet using the widely adopted ERC-20 standard.
What Makes Avit Different from Other Stablecoins?
The initiative introduced a novel U.S. dollar payment rail, which enables real-time, programmable transactions to occur directly between bank customers. What sets Avit apart is that this stablecoin is issued and redeemed directly by banks, ensuring full regulatory compliance from the outset.
The process of creating (minting), transferring, and redeeming Avit involves eight distinct stages. These include customer self-custody of the stablecoin and business-to-business transfers that occur outside the traditional banking system.
Related: Custodia Bank CEO Blasts Washington For Crackdown On Crypto
What Roles Do Custodia and Vantage Bank Play?
Custodia Bank is responsible for the issuance of Avit, as well as its custody, ongoing blockchain monitoring, and reconciliation processes, all managed through its proprietary Avit Management System.
Vantage Bank, on the other hand, will hold the necessary fiat reserves that back Avit that facilitates services such as Fedwire and ACH transfers.
Together, the two banks ensure that all activities related to Avit adhere to stringent anti-money laundering (AML) protocols, sanctions regulations, and all applicable banking laws.
What Are the Perspectives of the Bank CEOs?
Caitlin Long, CEO of Custodia Bank, emphasized the unique regulatory advantage of Avit, stating that it tokenizes real demand deposits rather than relying on synthetic dollars.
She further noted that this innovation allows traditional finance to tap into the global reach and low-cost benefits inherent in permissionless blockchain technology.
Jeff Sinnott, CEO of Vantage Bank, believes this will position them to take a leading role in modernizing cross-border payment systems while simultaneously strengthening the global standing of the U.S. dollar.
Why Was Ethereum Chosen as the Blockchain for Avit?
Despite Custodia Bank’s publicly known pro-Bitcoin stance, the decision to deploy Avit on the Ethereum blockchain has raised some eyebrows within the cryptocurrency community.
This led to industry insiders, including VanEck’s Matt Sigel, humorously calling out the contrast. Regardless, Ethereum’s established ecosystem made it the logical choice for secure, compliant token issuance.
Related: Custodia CEO Blasts Fed’s “Harsh Actions” Against Crypto Firms
Observers noted the apparent irony in this choice, particularly as the bank reportedly avoided directly mentioning Ethereum in its initial announcement of the Avit launch.
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