Custodia Bank and Vantage Launch New Stablecoin Avit

Custodia Bank and Vantage Bank have successfully launched the first-ever U.S. bank-issued stablecoin on a permissionless blockchain. The new stablecoin, named Avit, was issued, transferred, and redeemed using the Ethereum blockchain.

Custodia Bank and Vantage Bank, two U.S. institutions, have banded together to launch the first-ever U.S. bank-issued stablecoin on a permissionless blockchain.

The new stablecoin, called Avit, is fully backed by U.S. dollar reserves and was issued, transferred, and redeemed using the Ethereum blockchain. The token is built on the ERC-20 standard and may be familiar to those who follow the cryptocurrency closely.

Both banks are involved in different capacities. As the institutions holding a master account with the Federal Reserve, they were able to issue, transfer, and redeem the tokenized U.S. dollar on the Ethereum blockchain.

Meanwhile, the fiat currency and transactions between them were handled by Vantage Bank. Together, they were able to carry out a complete cycle of activity on the Ethereum platform. This allowed for a focused analysis of the transactions, revealing advantages such as reduced transaction costs, quicker settlement, and increased possibilities for programmability and review.

“We achieved on the legal/regulatory level that American banks can combine to tokenized demand deposits on a blockchain which is permission less and comfortable for the authorities to use,” said Caitlin Long, CEO of Custodia Bank.

This integration marks a significant step in linking conventional monetary systems with the decentralized blockchain environment. Through tokenization of USDD, Custodia and Vantage banks have developed a new payment method which may be said to have benefits in cross-border and digital payments.

While other stablecoins are created by private companies like Tether and USD coin, Avit is created by two U.S. institutions.

Avit was started in 2020 by Custodia Bank, which was previously known as Avanti Bank & Trust. The aim was to create a cash equivalent stablecoin for institutional investors and corporate treasurers with real-time payment and settlement solutions.

Its goal is to maintain a stable value while providing users with the flexibility of blockchain technology.

During its development, Custodia Bank encountered difficulties in securing a master account from the U.S. Federal Reserve, partly due to its crypto-related services, including Avit. The Federal Reserve expressed concerns that the bank’s involvement in digital assets could present systemic risks.

Despite these challenges, both banks have diligently worked with regulators to ensure their actions comply with U.S. banking laws, including anti-money laundering (AML) and Bank Secrecy Act (BSA) requirements.

The successful launch of Avit comes as other companies in the stablecoin market are also pushing forward. Circle, the issuer of USD Coin (USDC), has recently received approval from Japan’s Financial Services Agency (FSA) to launch USDC in the country.

Additionally, World Liberty Financial (WLFI) is preparing to launch its own stablecoin, USD1, backed by U.S. dollar reserves and short-term treasury bonds. This move is in response to the U.S. Department of the Treasury’s sanctions on crypto startup Aave.