- Custodia and Vantage Banks launched Avit, the first U.S. bank-issued stablecoin, using the Ethereum blockchain for secure and efficient transactions.
- The stablecoin is fully backed by U.S. dollar reserves and complies with banking regulations, ensuring a seamless integration with traditional finance.
- Despite regulatory challenges, Custodia Bank continues innovating, highlighting the growing role of blockchain in the financial industry.
Custodia Bank and Vantage Bank have successfully launched Avit, the first U.S. bank-issued stablecoin on a permissionless blockchain. Built on Ethereum using the ERC-20 standard, Avit is fully backed by U.S. dollar reserves. The initiative represents a significant development in integrating blockchain technology with traditional banking.
The role of Custodia Bank includes managing the issuance while performing redemption and custody activities for Avit, while Vantage Bank handles all fiat transactions. The banks conducted Ethereum tests of the stablecoin, which demonstrated its successful deployment. The trial showed how banks could benefit from blockchain technology through lower expenses and faster settlements, and improved programming abilities which made bank adoption of blockchain systems more possible.
A significant regulatory development occurred at Custodia Bank when U.S. banking institutions gained blockchain-based abilities to tokenize their demand deposits. The banking institutions collaborated with regulators to fulfill all U.S. banking regulations, including the Bank Secrecy Act and anti-money laundering criteria.
Custodia and Vantage enabled their users to tokenize U.S. dollar deposits through a new digital payment solution that strengthens borderless payment transactions and settlement methods. The U.S. banking sector backs Avit, so it differs from other private stablecoins, including Tether and USD Coin.
Origins and Development of AvitCustodia Bank, formerly known as Avanti Bank & Trust, initiated Avit in 2020. The stablecoin was designed as a cash-equivalent digital asset for institutional investors and corporate treasurers, offering real-time payment and settlement solutions. The goal was to provide a stable-value asset that leverages blockchain technology.
With other institutions developing stablecoin programs the success of Avit emerged at a critical time in the market. Circle has received official authorization from the Financial Services Agency of Japan to bring USD Coin to their market. Stablecoin issuance manages to attract World Liberty Financial as the company gets ready to introduce USD1, supported by U.S. dollar reserves along with short-term Treasury bonds.
The introduction of Avit underscores a broader shift toward blockchain adoption in traditional banking. With faster settlements and lower costs, stablecoins issued by regulated banks could reshape financial transactions. As regulatory frameworks evolve, more banks may explore blockchain-based solutions for digital payments.
