Crypto-friendly banks Custodia Bank and Vantage Bank have launched a turnkey blockchain solution that allows traditional banks to issue tokenized deposits powered by stablecoins.
The solution allows banks to leverage blockchain’s near-instant and low-cost transactions in a way that is interoperable with other banks while preserving customer deposits, the banks said in a statement Thursday.
“The patent-protected framework is designed to provide institutions and their customers with the efficiency and security of tokenization while protecting core deposits from the risk of disintermediation.”
sauce: caitlin long
Tokenized deposits are digital versions of bank deposits issued on the blockchain and represent real US dollars held by banks.
The initiative aims to address interoperability between cryptocurrencies and traditional banking by introducing a single digital token that can function as both a tokenized deposit and a stablecoin.
The platform is accessible to banks of all sizes and maintains control of their wallets, including tokenized deposits and GENIUS Act-compliant stablecoins.
The solution leverages Custodia’s bank-specific blockchain and Infinant’s payments platform, Interlace Network. This comes seven months after Custodia became the first bank in the US to issue tokenized deposits on a permissionless blockchain using Vantage.
Tokenized deposits compete with private stablecoins
The current cryptocurrency bull market is primarily driven by adoption by institutional investors, with banks and TradFi companies adopting a wide range of strategies to participate in the cryptocurrency space.
One area of adoption is stablecoins, which are now a $300 billion market and received a major boost with US President Donald Trump signing the GENIUS Act in July.
However, banks have raised concerns with regulators that stablecoin issuers and their affiliates could undermine the traditional banking system by offering interest or yield on deposits.
In April, the U.S. Treasury estimated that the stablecoin market could reach $2 trillion by 2028, leading to $6.6 trillion in bank deposits.
For banks, tokenized deposits could help mitigate these drains and remain competitive as the banking industry moves towards digital solutions.
Custodia’s solutions are already having a big impact
Custodia is already running early pilot programs leveraging dollar tokenization technology, including ones that enable cross-border payments to transportation companies and milestone-based spending in construction.
It also supports supply chain payments in manufacturing and more flexible pay options in service industries.
