Crypto friendly Custodia Bank, working alongside Vantage Bank, completed the tokenization of dollar-demand deposits with the issuance of its trademarked Avit stablecoin on Ethereum mainnet. 

The stablecoin issuance, which the bank says is the “first bank-issued stablecoin on a permissionless blockchain,” took place in eight transaction stages. Custodia Bank handled the blockchain issuance and custody services while Vantage Bank provided FedWire/ACH services and managed the stablecoin fiat reserves. 

“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, said Custodia Bank CEO Caitlin Long in a statement. “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.” 

All parties to the series of transactions observed “low transaction costs, fast transaction settlement, programmability and auditability within a safe, compliant and regulated banking environment,” according to a statement from Custodia. “A new U.S. dollar payment rail has now been activated inside the U.S. banking system, at a time when the global community is increasingly demanding U.S. dollar stablecoins for transactional use.”

The bank’s collaboration comes as stablecoins are a crypto industry focal point, highlighted by the GENIUS Act, a bill with bi-partisan support that would provide regulatory clarity for stablecoins and their issuers. 

That regulation might lead to a host of new stablecoins and issuers. “As soon as this legislation passes, there are going to be 10,000 companies looking at this,” Niklas Kunkel, the founder of blockchain oracle builder Chronicle Labs told Decrypt in February. 

Some of those stablecoins could come from other banks, like Bank of America, whose CEO already said the firm would look to debut a stablecoin if legislation is passed.

Custodia Bank, a Wyoming-based bank, has been in a longtime battle with the Fed over its inability to gain access to a “master account,” which would give it access to the Fed’s liquidity and its payment services like PayNow. The bank, which lost its lawsuit to the Fed arguing that it was entitled to a master account, filed an appeal in September 2024. 

Stablecoin market caps jumped $4 billion in the last week according to data from DefiLlama, bringing the total market capitalization to more than $233 billion. 

Decrypt reached out to Custodia Bank for additional comment. 

Edited by James Rubin