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Highlights
- Custodia and Vantage Bank launch Avit, the first U.S. bank-issued stablecoin on Ethereum, backed by U.S. dollar reserves for real-time settlements.
- Avit stablecoin offers faster, low-cost transactions on Ethereum, bridging traditional banking and blockchain tech with regulatory compliance.
- As Custodia & Vantage launch Avit, World Liberty Financial launched its own stablecoin, USD1, backed by dollar reserves and treasury bonds.
Custodia Bank and Vantage Bank have successfully launched the first-ever U.S. bank-issued stablecoin on a permissionless blockchain. The new stablecoin, named Avit, was issued, transferred, and redeemed using the Ethereum blockchain. This achievement marks a significant step in the integration of traditional banking with blockchain technology.
Custodia Bank and Vantage Launch New Stablecoin Avit
According to a press release, Avit is a stablecoin designed to be fully backed by U.S. dollar reserves. It is built on the Ethereum blockchain using the ERC-20 token standard, which is widely recognized in the cryptocurrency industry. Custodia Bank and Vantage Bank partnered to launch the stablecoin, and, while both entities are involved in the process, they perform various tasks within the project.
Custodia Bank oversaw the issuance and redemption of the digital asset on the blockchain, as well as the custody of the same, on the other hand, Vantage Bank handled the fiat currency and the transactions between them. At the end, they were able to conduct sequence of activities on the Ethereum platform. The tests showed various advantages such as reduced transactions costs, quicker settlement, and increased possibility of programmability and review.
As Caitlin Long, the CEO of Custodia Bank noted this is a promising step forward in the legal and regulatory treatment of stablecoins.
”We achieved on the legal/regulatory level that American banks can associated to tokenize demand deposits on a blockchain which is permission less and comfortable for the authorities to use,” she said.
Blockchain and Banking Integration
Stablecoins such as Avit provides the ability to link the conventional monetary systems to the blockchain environment. Through tokenization of USDD, Custodia and Vantage banks have developed a new payment method which may seem to have benefits both in cross-border and digital payments.
While there are other stablecoins which are created by private companies like Tether and USD coin, Avit, is created by two U.S. banks.
Avit was initiated in the year 2020 by Custodia Bank which was previously known as Avanti Bank & Trust. The token’s initial objective was to create a cash equivalent stablecoin for institutional investors and corporate treasurers with real-time payment and settlement solutions. With its backing of U.S. dollar reserves, the coin aims to maintain a stable value while providing users with the flexibility of blockchain technology.
Regulatory Challenges and Collaboration
During the development of Avit, Custodia Bank faced difficulties in securing a master account from the U.S. Federal Reserve, partly due to its crypto-related services, including Avit. The Federal Reserve expressed concerns that the bank’s involvement in digital assets could present systemic risks.
Despite these challenges, Custodia Bank and Vantage Bank have continued to move forward with their plan. Both banks have worked closely with regulators to ensure that their actions comply with U.S. banking laws, including anti-money laundering (AML) and Bank Secrecy Act (BSA) requirements.
The success of Avit comes as other companies in the stablecoin market are also pushing forward with their own initiatives. Circle, the issuer of USD Coin (USDC), has recently received approval from Japan’s Financial Services Agency (FSA) to launch USDC in the country. Additionally, World Liberty Financial (WLFI) is preparing to launch its own stablecoin, USD1, backed by U.S. dollar reserves and short-term treasury bonds.
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