Custodia Bank and Vantage Bank Launch Avit, the First US Bank-Backed Stablecoin

The stablecoin was used in a series of test transactions with a business customer. The pilot included minting, transferring, and redeeming tokens on the Ethereum (ETH) mainnet using the ERC-20 standard.

Custodia Bank and Vantage Bank have issued the first U.S. bank-backed stablecoin on a public blockchain network, according to a March 25 announcement.

The stablecoin, called Avit, was used in a series of test transactions with a business customer to mint, transfer, and redeem tokens on the Ethereum (ETH) mainnet using the ERC-20 standard.

This marks the first time that dollar demand deposits from regulated banks have been tokenized on Ethereum.

The series of eight test transactions demonstrated a fully compliant process for minting, transferring, and redeeming stablecoins on a permissionless blockchain.

Avit tokens were created using the widely adopted ERC-20 standard, and the pilot included real-world business-to-business transfers and redemptions into fiat U.S. dollars.

This signals a breakthrough in blending blockchain technology with the U.S. banking system at a time of global demand for dollar-denominated digital payments.

Based in Wyoming, Custodia Bank managed the issuance, custody, monitoring, and reconciliation of the tokens using its proprietary Avit Management System. Meanwhile, Texas-based Vantage Bank held the fiat reserves backing the tokens and facilitated traditional settlement services via Fedwire and ACH.

The test involved a bank customer transferring Avit tokens into self-custody, transacting with third parties outside the banking system, and redeeming them back into dollar deposits.

Unlike existing stablecoins that operate largely outside the traditional banking perimeter, the Avit pilot was conducted entirely within a regulated banking environment.

Both banks ensured compliance with Bank Secrecy Act (BSA), anti-money laundering (AML), and Office of Foreign Assets Control (OFAC) rules. This required the development of tailored documentation, policies, and procedures that meet federal banking standards, establishing a potential blueprint for other institutions.

Custodia Bank CEO Caitlin Long said:

“We broke ground on the legal and regulatory front, proving that US banks can collaborate to tokenize demand deposits on a permissionless blockchain in a regulatorily compliant manner.”

With programmable features, fast settlement times, low transaction costs, and transparent auditability, the pilot revealed the potential of blockchain-based stablecoins to modernize U.S. dollar payments while retaining the safeguards of the banking system.

Vantage Bank CEO Jeff Sinnott called the milestone “a pivotal moment in reshaping the financial landscape,” adding that it showcases how banks can spearhead cross-border payment innovation while reinforcing trust in the American dollar.

The transactions also marked the first use of a U.S. patent (No. 11392906) granted to Custodia in 2022, for the tokenization of bank deposits on permissionless blockchains.

The banks intend for this pilot to serve as a foundation for future real-time, programmable payment infrastructure anchored in the regulatory rigor of U.S. banking law.

As U.S. policymakers continue debating the role of stablecoins in the broader economy, the Avit launch may signal a path forward for dollar digitalization that aligns innovation with oversight.