Custodia Bank, in partnership with Vantage Bank, has launched a revolutionary new stablecoin, Avit™. As of March 25, 2025, the two financial institutions have completed America’s first-ever tokenization of U.S. dollar demand deposits on a permissionless blockchain. This innovation addresses several persistent challenges in the crypto ecosystem, such as crypto market volatility, security concerns, and the ongoing struggles with blockchain adoption that many users face today.

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How Custodia & Vantage Bank’s Stablecoin Will Impact Crypto Markets and Security

The Avit™ stablecoin was issued, transferred, and then later redeemed on the Ethereum mainnet using the ERC-20 standard. At the time of writing, the transaction process has completed all eight planned stages, with Vantage Bank handling the management of fiat reserves while Custodia Bank took care of the various blockchain services. The Custodia Bank stablecoin transaction demonstrated several notable efficiencies, such as lower transaction costs, much faster settlement times, programmability features, and enhanced auditability—all within a properly regulated banking environment.

Addressing Cryptocurrency Security Risks

The security frameworks that have been established for the Custodia Bank stablecoin represent a significant advancement over existing models currently available in the market. Both institutions are fully compliant with U.S. bank regulatory requirements right now, including the strict BSA/AML/OFAC protocols, and have developed specialized documentation and procedures.

Caitlin Long, CEO of Custodia Bank, stated:

“We broke ground on the legal/regulatory front, proving that U.S. banks can collaborate to tokenize demand deposits on a permissionless blockchain in a regulatorily-compliant manner.”

Mitigating Crypto Market Volatility

The stablecoin introduces several stability mechanisms that can help address one of cryptocurrency’s biggest ongoing challenges. Unlike many other volatile cryptocurrencies, the Avit™ tokens are backed by real U.S. dollar deposits. The initial test transactions have already revealed multiple efficiencies that could help reduce crypto market volatility. This involves better integration with regulated banking infrastructure.

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Advancing Blockchain Adoption

This new bank-issued stablecoin may signal an important turning point for mainstream blockchain adoption. The deployment utilized Custodia’s existing patent for tokenizing U.S. dollar bank deposits on permissionless blockchains, an innovation that could transform how financial institutions approach cryptocurrency.

Jeff Sinnott, President and CEO of Vantage Bank, emphasized:

“This event marks a pivotal moment in reshaping the financial landscape, demonstrating how blockchain and stablecoins can revolutionize payments. By executing this transaction, we’re empowering banks to lead responsibly in cross-border modernization.”

Regulatory Considerations

The Vantage Bank stablecoin project involved close collaboration with various bank regulators. Custodia must comply with Wyoming’s special purpose depository institution laws, which currently require 100% reserved fiat deposits. The Federal Reserve has already deemed Custodia eligible for a Federal Reserve master account back in 2022. This provides an important regulatory foundation for the stablecoin going forward.

Regulated financial institutions’ increased involvement could mitigate cryptocurrency security risks. As blockchain adoption continues to grow in the coming years, hybrid solutions like this one are ideal. They bridge traditional banking with cryptocurrency innovation.

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Long also noted:

“Custodia looks forward to the reversal of U.S. regulatory obstacles that have stymied stablecoin innovation in recent years so that American consumers can benefit from the substantial network effects and global reach of permissionless blockchain technologies.”

The new U.S. dollar payment rail arrives as global demand for U.S. dollar stablecoins increases. This innovation actively transforms how the market addresses crypto volatility and security challenges through solutions like the Custodia Bank stablecoin.