Custodia partnered with Vantage Bank to launch the first bank-issued stablecoin.

Custodia Bank has joined forces with Vantage Bank to tokenize U.S. dollar demand deposits and issue them on Ethereum. This marks a historic milestone as the first instance of a bank-issued stablecoin on a permissionless blockchain.

Announced on March 25, Custodia successfully facilitated the issuance, transfer, and redemption of the stablecoin “Avit” using the ERC-20 token standard on Ethereum.

According to Custodia, this development represents the activation of a new U.S. dollar payment rail within the U.S. banking system, signaling a major shift in the way banks leverage blockchain technology for financial transactions.

Custodia CEO Caitlin Long highlighted the legal and regulatory significance of this achievement, stating that the initiative proves U.S. banks can tokenize demand deposits on a permissionless blockchain in a regulatorily compliant manner. 

She emphasized that the collaboration between Custodia and Vantage Bank has set a precedent for banks looking to integrate blockchain technology into traditional financial systems.

Vantage Bank CEO Jeff Sinnott described the launch as a pivotal moment in the evolution of finance. He noted that this project demonstrates the potential for blockchain and stablecoins to revolutionize payment systems, bringing greater efficiency, transparency, and accessibility to financial transactions. 

By tokenizing U.S. dollar demand deposits, the two banks have effectively introduced a blockchain-based alternative to traditional payment rails, which could reshape how financial institutions interact with digital assets in the future.

Caitlin Long further clarified that Avit is not a synthetic stablecoin, but rather a "real dollar" stablecoin. This distinction comes in response to comments from Federal Reserve Governor Christopher Waller, who referred to stablecoins as “synthetic dollars” in a speech earlier this year. 

Long explained that only a few legally authorized entities, including the Federal Reserve and select banks like Custodia, can issue real U.S. dollars. Since Avit represents tokenized demand deposits—funds that customers can withdraw on demand, similar to checking account balances—it qualifies as a real U.S. dollar-backed stablecoin rather than a synthetic asset.

Despite Custodia’s historical support for Bitcoin, the decision to build Avit on Ethereum has drawn attention from blockchain advocates. 

Some Ethereum supporters were quick to highlight that Ethereum’s infrastructure made this development possible.

Ethereum advocate Evan Van Ness remarked, “ETH fixed this. Bitcoin couldn’t,” emphasizing Ethereum’s superiority in enabling stablecoin issuance and tokenized finance. 

Blockchain educator Anthony Sassano also weighed in, pointing out that Custodia’s reference to a permissionless blockchain was a clear nod to Ethereum’s capabilities.

The Ethereum network has solidified its dominance in the stablecoin market, currently securing over $125.8 billion in stablecoins, nearly double the amount held on Tron, which ranks second with $64.8 billion, according to DefiLlama data. Additionally, Ethereum leads in the tokenization of real-world assets (RWA), with over $3.6 billion worth of U.S. 

Treasury bills issued on the blockchain—more than seven times the amount tokenized on Stellar, which holds $465.7 million, as reported by RWA.xyz.

The launch of Avit represents a groundbreaking step in the integration of blockchain with traditional banking, setting the stage for further collaboration between regulated financial institutions and the digital asset ecosystem.