KEY FACTS: Custodia Bank has made history by executing the first U.S. bank-issued stablecoin transaction on the Ethereum blockchain in partnership with Vantage Bank Texas. The transaction involved the issuance, transfer, and redemption of Custodia’s Avit™ stablecoin, a fully regulated digital asset backed 100% by cash reserves held at a bank, distinguishing it from non-bank stablecoins like Tether and USDC. Completed on March 24, 2025, using the ERC-20 standard, the process tokenized U.S. dollar demand deposits, enabling a customer to conduct business-to-business transactions outside traditional banking before redeeming the tokens back into fiat.

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Source: Caitlin Long/ X

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Custodia Bank and Vantage Bank Launch First U.S. Bank-Issued Stablecoin on Ethereum Blockchain

Custodia Bank, a Wyoming-based special purpose depository institution (SPDI), made history by executing the first-ever tokenization of a U.S. bank’s dollar demand deposits on a permissionless blockchain - Ethereum, in partnership with Vantage Bank Texas. This historic achievement, announced on March 25, 2025, marks a significant milestone in the evolution of financial systems, introducing a new U.S. dollar payment rail within the regulated banking sector. The initiative, executed through the issuance, transfer, and redemption of Custodia’s trademarked Avit™ stablecoins, signals a bold step forward in blending traditional finance's stability with blockchain technology's innovation.

First-ever tokenization of a U.S. bank’s demand deposits on a permissionless blockchain...
Custodia Bank, working with Vantage Bank, yesterday completed America’s first-ever tokenization of a bank’s U.S. dollar demand deposits on a permissionless blockchain by issuing, transferring and redeeming Avit™ stablecoins for a bank customer.
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The announcement comes at a time when global demand for U.S. dollar-backed stablecoins is surging, driven by their utility in fast, low-cost, and programmable transactions. Stablecoins, digital assets pegged to the value of a fiat currency like the U.S. dollar, have become a cornerstone of the cryptocurrency ecosystem, offering a stable medium of exchange in an otherwise volatile market. However, until now, their issuance has largely been the domain of non-bank entities, often operating outside the stringent regulatory frameworks that govern traditional financial institutions. Custodia Bank and Vantage Bank’s collaboration changes that narrative, proving that U.S. banks can tokenize demand deposits on a permissionless blockchain while adhering to rigorous regulatory standards.

The transaction, which took place on March 24, 2025, involved a series of eight meticulously planned stages, executed on the Ethereum mainnet using the widely adopted ERC-20 token standard. Custodia Bank, a Wyoming-based institution known for its crypto-friendly approach, spearheaded the blockchain issuance and redemption services, custody operations, transaction monitoring, and reconciliation through its proprietary Avit Management System. Meanwhile, Vantage Bank, a Texas-based community bank, managed the fiat reserves backing the stablecoin and provided FedWire and ACH services, ensuring seamless integration with the traditional banking infrastructure.

The process began with the tokenization of U.S. dollar demand deposits—funds that customers can withdraw on demand, such as those in checking accounts—into Avit stablecoins. A bank customer then transferred these Avit tokens into self-custody, conducting business-to-business transactions outside the banking system. Finally, the customer returned the tokens to Custodia Bank, redeeming them back into U.S. dollar demand deposits. This full cycle demonstrated the practical utility of Avit as a digital asset that can operate both within and beyond the confines of traditional banking, all while maintaining compliance with U.S. regulations.

Unlike many existing stablecoins, which are often backed by a mix of cash, cash equivalents, or other assets held by non-bank issuers, Avit is distinguished by its direct tie to 100% reserved demand deposits held at a regulated bank. This structure aligns with Custodia’s charter as a Wyoming special purpose depository institution (SPDI), which mandates that all fiat deposits be fully reserved— eschewing the fractional reserve model typical of most banks. This approach not only enhances transparency and stability but also positions Avit as a “real dollar” stablecoin, as opposed to what some regulators have termed “synthetic” dollars issued by less-regulated entities.

The successful execution of this project required navigating a complex web of regulatory requirements, a feat that Custodia Bank CEO Caitlin Long hailed as a breakthrough. Long said in a statement:

“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,”

Both Custodia and Vantage worked closely with their respective regulators to ensure adherence to all applicable U.S. banking laws, including the Bank Secrecy Act (BSA), anti-money laundering (AML) protocols, and Office of Foreign Assets Control (OFAC) sanctions compliance.

This compliance effort necessitated the development of unique documentation, policies, and procedures tailored to the issuance of Avit, distinguishing it from other stablecoin models. Long added:

“The banks complied with all applicable U.S. bank regulatory requirements, which necessitated designing documentation, policies, and procedures that differ from those of current stablecoin issuers,”

This regulatory diligence underscores the project’s significance as a model for how traditional financial institutions can responsibly innovate in the digital asset space.

Jeff Sinnott, President and CEO of Vantage Bank, echoed Long’s enthusiasm, describing the event as a “pivotal moment in reshaping the financial landscape.” He emphasized the transformative potential of blockchain and stablecoins, stating thus:

“By executing this transaction, we’re empowering banks to lead responsibly in cross-border modernization, while also leveraging the strength of the U.S. dollar and demonstrating regulators’ support for responsible innovation.”

The implications of this achievement extend far beyond the technical success of a single transaction. By activating a new U.S. dollar payment rail within the banking system, Custodia and Vantage have opened the door to a future where traditional finance can harness the benefits of permissionless blockchains while remaining firmly rooted in a safe, compliant, and regulated environment. This development is particularly timely as the global community increasingly turns to stablecoins for transactional use, seeking alternatives to traditional payment systems that often suffer from delays and high fees.

For Custodia Bank, this milestone is the culmination of years of effort to integrate digital assets into the U.S. banking system. Founded as Avanti Bank in 2020 and later rebranded, Custodia has positioned itself as a pioneer in the crypto banking space, leveraging Wyoming’s progressive digital asset laws to offer services that bridge the gap between fiat and cryptocurrency. The bank’s SPDI charter, granted by the Wyoming State Banking Board, requires it to maintain 100% reserves for fiat deposits and adhere to the strictest investor protections in the digital asset industry—standards that set it apart from traditional banks and many stablecoin issuers alike.

The launch of Avit arrives amid growing momentum in the stablecoin market, which has seen its total market capitalization soar to over $233 billion, according to recent data from DefiLlama. The choice of Ethereum as the blockchain platform for Avit also underscores the network’s dominance in the stablecoin ecosystem, where it secures over $125.8 billion in stablecoin value—nearly double that of its closest competitor, Tron. Ethereum’s robust infrastructure and widespread adoption made it a natural fit for this pioneering project, though Custodia has indicated it may explore other blockchains in the future based on customer demand and network security.

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Information Sources:

• Custodia Bank
• Caitlin Long / X
• Cointelegraph

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