Custodia Bank and Vantage Bank have announced a tokenized payment model that combines bank deposits and stablecoins into one asset, with plans to make the network available to banks and customers in the fourth quarter of 2026.
According to a white paper published on June 18, the proposed token will have different legal and operational forms depending on where it is held. Within the Hazel banking network, it functions as a bank deposit issued by participating institutions. When transferred to an external user or platform outside the consortium, it becomes a stablecoin backed by cash and short-term US Treasury securities.
Custodia and Vantage said the system has been running on Ethereum since March and is currently being tested with participating banks ahead of a planned launch later this year. The companies said Hazel is designed to support tokenized deposits, stablecoins, and other blockchain-based financial assets through a shared banking infrastructure.
Rather than requiring banks to overhaul their existing systems, the whitepaper says Hazel operates alongside their current core banking software, payment rails and ledger infrastructure. Participating institutions can continue to use their existing systems while providing blockchain-based payment services.
The proposal comes as banks seek ways to enter tokenized payments while retaining customer deposits within the regulated banking sector. Custodia and Vantage said the platform is aimed at institutions of all sizes, including community banks and credit unions, that can participate in digital asset payments without moving deposits to a third-party stablecoin issuer.
🚀 Vantage Bank is exploring the future of banking. 🚀
In partnership with Custodia, we successfully completed a proof of concept for geolocation-based payments using tokenized USD bank deposits. This shows how programmable money can transform the way…
— Vantage Bank (@Vantage_Bank) July 1, 2025
Banks promote tokenized deposit plans
Across the banking industry, financial institutions are increasingly considering tokenized deposits as an alternative to traditional stablecoin models.
Earlier this month, the Wall Street Journal reported that the clearinghouse, whose owners include JPMorgan Chase, Bank of America and Citigroup, is preparing a tokenized deposit network that could launch in the first half of 2027. According to the report, the system will allow banks to settle payments using a blockchain-based representation of customer deposits.
At the same time, banking groups are opposing proposals that would allow stablecoin issuers to offer higher-yielding products. JPMorgan CEO Jamie Dimon recently said the bank will continue to challenge provisions in the U.S. crypto market structure bill, the Clarity Act, which it claims could allow crypto companies to compete for deposits without a bank license.
The stablecoin sector has grown to around $315 billion from around $251 billion a year ago, according to DefiLlama data, highlighting the growing role of blockchain-based dollar assets in payments and settlement activities.
For Custodea, the Hazel initiative comes after years of regulatory wrangling over access to the traditional banking system. In March, the U.S. Court of Appeals for the 10th Circuit declined to reopen the bank’s challenge to the Federal Reserve after regulators rejected its application for a master account.
Custodea has argued that direct access to the Federal Reserve’s payments infrastructure allows it to provide payment services without relying on intermediary banks, but regulators have cited concerns related to the company’s crypto-centric business model.
