Despite regulatory hurdles, Custodia bank and Vantage ensured that the stablecoin is in compliance with U.S. banking laws.
The first-ever U.S. bank-issued stablecoin on a permissionless blockchain has been effectively launched by Custodia Bank and Vantage Bank. The Ethereum blockchain was employed to issue, transmit, and redeem the new stablecoin, Avit.
Custodia Bank and Vantage Launch New Stablecoin Avit
This accomplishment represents a substantial advancement in the integration of blockchain technology with traditional banking. According to a press release, Avit is a stablecoin that intends to have complete backing from U.S. dollar reserves.
The Ethereum blockchain employs the widely recognized ERC-20 token standard for its construction. The stablecoin was launched through a partnership between Custodia Bank and Vantage Bank.
Despite their engagement in the project, both organizations fulfill distinct responsibilities. The issuance and redemption of the digital asset on the blockchain, as well as its custody, were overseen by Custodia Bank.
Conversely, Vantage Bank was responsible for the fiat currency and the transactions between it and the digital asset. In the end, they were able to sequence a series of activities on the Ethereum platform.
The experiments demonstrated various benefits, including a reduction in transaction costs, a faster settlement time, and an increased likelihood of programmability and review.
This move is a promising development in the legal and regulatory treatment of stablecoins, as Caitlin Long, the CEO of Custodia Bank, observed.Stablecoins, such as Avit, enable the connection between traditional monetary systems and the blockchain environment.
Custodia and Vantage institutions have created a novel payment method that appears to have advantages in both cross-border and digital payments by tokenizing USDD.
Avit is a stablecoin that was developed by two U.S. banks, in contrast to other stablecoins that are created by private corporations such as Tether and USD Coin.
Regulatory Challenges and Collaboration
Custodia Bank, which was formerly known as Avanti Bank & Trust, established Avit in 2020. The token’s initial goal was to establish a cash-equivalent stablecoin that would provide real-time payment and settlement solutions for corporate treasurers and institutional investors.
The coin endeavors to preserve a consistent value while simultaneously offering users the adaptability of blockchain technology, as evidenced by its backing of U.S. dollar reserves.
Custodia Bank encountered challenges in obtaining a master account from the U.S. Federal Reserve during the development of Avit, which was partially attributable to its crypto-related services, including Avit.
The Federal Reserve conveyed apprehension that the bank’s involvement in digital assets could pose systemic risks. In spite of these obstacles, Custodia Bank and Vantage Bank have persisted in their implementation of their strategy.
Both banks have collaborated with regulators to guarantee that their operations adhere to U.S. banking regulations, which encompass the Bank Secrecy Act (BSA) and anti-money laundering (AML) mandates.
Avit’s success is a result of the fact that other companies in the stablecoin market are also conducting their own initiatives. The Financial Services Agency (FSA) of Japan has recently granted Circle, the issuer of USD Coin (USDC), permission to introduce USDC in the country.
Furthermore, World Liberty Financial (WLFI) is in the process of introducing its stablecoin, USD1, which will be supported by short-term treasury bonds and U.S. dollar reserves.
