Two U.S. banks have collaborated for the first time to tokenize U.S. dollar deposits on a public blockchain.
Initial Steps in Crypto Finance
Wyoming-based Custodia Bank and Texas' Vantage Bank tokenized deposits by issuing, transferring, and redeeming Avit stablecoins. The transaction followed regulatory requirements including the U.S. Bank Secrecy Act and anti-money laundering measures.
Features of the Avit Stablecoin
Avit differs from other stablecoins. Custodia Bank CEO Caitlin Long stated this innovation enables traditional finance users to benefit from blockchain networks. The method was patented in 2022 by Custodia Bank, and the activities took place on the Ethereum mainnet using the ERC-20 standard.
Interaction with the Federal Reserve System
Custodia faced challenges with the Federal Reserve, which denied it membership in January 2023. The Fed viewed Custodia's plans as risky due to the issuance of crypto assets on public networks. Custodia was established as a special depository institution with 100% reserved deposits.
This initiative opens new possibilities for integrating blockchain technology into traditional banking while highlighting regulatory challenges facing financial innovation.
