Custodia Bank Launches First Bank-Issued Stablecoin on a Permissionless Blockchain
Custodia Bank, known for its crypto-friendly approach, has partnered with Vantage Bank to successfully tokenize dollar-demand deposits through the issuance of its trademarked Avit stablecoin on the Ethereum mainnet.
According to the bank, this marks the “first bank-issued stablecoin on a permissionless blockchain.” The issuance process was carried out in eight transaction stages, with Custodia Bank managing blockchain issuance and custody services, while Vantage Bank handled FedWire/ACH services and oversaw the fiat reserves backing the stablecoin.
“We broke ground on the legal/regulatory front, proving that U.S. banks can collaborate to tokenize demand deposits on a permissionless blockchain in a regulatorily-compliant manner,” said Custodia Bank CEO Caitlin Long. “Custodia looks forward to the reversal of U.S. regulatory obstacles that have stymied stablecoin innovation in recent years, so that American consumers can benefit from the substantial network effects and global reach of permissionless blockchain technologies.”
Custodia highlighted that all parties involved in the transactions experienced “low transaction costs, fast transaction settlement, programmability and auditability within a safe, compliant and regulated banking environment.” The bank also emphasized that “a new U.S. dollar payment rail has now been activated inside the U.S. banking system, at a time when the global community is increasingly demanding U.S. dollar stablecoins for transactional use.”
This collaboration comes as stablecoins remain a key focus in the crypto industry, particularly with the introduction of the GENIUS Act—a bipartisan bill aimed at providing regulatory clarity for stablecoins and their issuers.
Once legislation is in place, the market could see a wave of new stablecoin issuers. “As soon as this legislation passes, there are going to be 10,000 companies looking at this,” said Niklas Kunkel, founder of blockchain oracle builder Chronicle Labs, in an interview with Decrypt in February. Among the potential entrants is Bank of America, whose CEO has expressed interest in launching a stablecoin if regulatory approval is secured.
Custodia Bank, based in Wyoming, has been engaged in a prolonged legal battle with the Federal Reserve over its request for a “master account,” which would grant access to the Fed’s liquidity and payment services such as PayNow. After losing its lawsuit arguing for entitlement to a master account, Custodia filed an appeal in September 2024.
Meanwhile, the stablecoin market continues to grow, with market caps rising by $4 billion in the past week, pushing the total stablecoin market capitalization to over $233 billion, according to DefiLlama.
