TL;DR
- Custodia Bank and Vantage Bank launched Avit, the first bank-issued stablecoin registered on a permissionless blockchain.
- Avit is backed by real dollar reserves and issued on Ethereum under the ERC-20 standard. Complying with BSA, AML, and OFAC regulations.
- The project aims to provide a regulated and efficient alternative for cross-border payments and business transactions, integrating traditional banking with blockchain technology.
Custodia Bank and Vantage Bank have launched Avit, the first bank-issued stablecoin registered on a permissionless blockchain.
This initiative represents a significant shift in the relationship between traditional banking and blockchain technology, enabling the tokenization of customer demand deposits in U.S. dollars and managing them in a fully regulated manner, following U.S. banking regulations.
The project is based on the tokenization of customer deposits, converting dollars into Avit, a digital asset backed by real cash reserves and issued on the Ethereum blockchain using the ERC-20 standard. Unlike other stablecoins like USDT or USDC, which are issued by non-banking entities and primarily backed by government debt and cash equivalents, Avit is directly supported by regulated banking institutions.
The issuance and transaction process for Avit was developed in eight stages. Custodia Bank managed the issuance and monitoring of blockchain transactions. While Vantage Bank handled fiat reserves and traditional banking operations through Fedwire and ACH. Customers could self-custody their Avit tokens and use them for business transactions outside the traditional banking system. With the option to redeem them for cash dollars through Custodia.
Custodia and Vantage Offer a Regulated, Cross-Border Stablecoin
The initiative complied with BSA, AML, and OFAC regulations, establishing specific procedures and policies to ensure transparency and security. The banks worked closely with regulators to adapt the regulatory framework to this hybrid model of traditional banking and digital assets. This contrasts with Custodia’s previous regulatory issues. Such as the Federal Reserve’s rejection of its master account request, a decision the institution continues to appeal.
Custodia operates as a Special Purpose Depository Institution (SPDI) under Wyoming’s regulatory framework. Allowing it to offer digital asset custody services with 100% full reserves. This guarantees total deposit liquidity and reduces risks associated with insufficient cash backing.
The issuance of Avit seeks to provide a regulated and efficient alternative for cross-border payments and business transactions. Leveraging the security and auditability of the Ethereum blockchain.
