Two Major Banks Launch U.S. Bank-Backed Stablecoin on Ethereum

Custodia Bank, a notable player in the crypto space, has partnered with Vantage Bank to introduce a groundbreaking stablecoin, marking a first for the U.S. banking sector.

On March 25, they announced the successful launch of the “Avit” stablecoin, which is backed by tokenized U.S. dollar demand deposits. Unlike synthetic dollars, as described by Federal Reserve officials, Avit is backed by actual dollars in a U.S. bank’s demand deposit accounts, allowing for real-time transfer and redemption on the Ethereum blockchain using the ERC-20 standard.

This milestone represents a significant development in the integration of blockchain into the U.S. financial system, signaling the potential for banks to tokenize assets in a compliant manner. Custodia’s CEO, Caitlin Long, pointed out the regulatory breakthrough, stressing that the partnership with Vantage Bank proves that U.S. banks can legally engage with blockchain technology to create new payment systems.

The event was hailed as a pivotal moment in the evolution of the financial landscape, with Vantage Bank’s CEO, Jeff Sinnott, praising the collaboration as a key moment in reshaping the payments space through the use of stablecoins and blockchain. Long also clarified that Avit is fully backed by legal U.S. dollars, noting that only a select group of entities, including Custodia, are authorized to issue such “real” dollars.

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The choice of Ethereum for this project also sparked excitement in the crypto community. Supporters of Ethereum, such as advocate Evan Van Ness and educator Anthony Sassano, emphasized that Ethereum’s permissionless blockchain made it the ideal platform for this initiative. Ethereum’s established dominance in the stablecoin market, holding over $125 billion worth of stablecoins, further solidified the blockchain’s suitability for such innovations.

As Ethereum continues to lead in tokenized assets, including over $3.6 billion in U.S. Treasury bills, this partnership between Custodia and Vantage Bank signals a bold new era for both the banking and crypto industries.

Alexander Stefanov