Custodia Bank, Vantage Bank complete bank-issued stablecoin on permissionless blockchain

This has been achieved by issuing, transferring, and redeeming Avit stablecoins for a bank customer. Also, a new USD payment rail has been activated inside the US banking system during a period when the worldwide community is demanding USD stablecoins for transactional use. All the members that took part in the series of test transactions witnessed several advantages, including low transaction costs, efficient transaction settlement, and programmability and auditability within a safe, compliant, and regulated banking environment.

How was this accomplished?

Custodia Bank and Vantage Bank worked on the mint, transfer, and redemption of Avit tokens for a bank customer on the Ethereum mainnet, leveraging the ERC-20 standard. As detailed in the official press release, parties transacted in eight stages, including transferring by the bank customer to its Avit tokens into self-custody, transacting with its Avit tokens business-to-business outside the banking system, and relocating its Avit tokens back to Custodia Bank for redemption into USD demand deposits.

Vantage Bank managed the stablecoin fiat reserves and offered Fedwire/ACH services. On the other hand, Custodia Bank focused on blockchain issuance and redemption services, custody services, blockchain transaction monitoring, and reconciliation, leveraging its Avit Management System. Also, the two banks complied with all applicable regulatory requirements, including BSA, AML, and OFAC, which included developing documentation, policies, and procedures, different from those of current stablecoin issuers.

Commenting on the news, representatives from Custodia Bank mentioned that, through this move, the bank underlined how US financial institutions can collaborate to tokenize demand deposits on a permissionless blockchain in a regulatory-compliant manner. Also, Vantage Bank highlighted that the initiative supports the advancement of the financial landscape while also indicating how blockchain and stablecoins can further optimise payments.