U.S. banks, Custodia Bank, and Vantage Bank have launched a blockchain-based solution for tokenized deposits and stablecoin support that can be integrated by traditional banks looking to offer digital asset services.
Summary
- Custodia and Vantage have launched a blockchain solution for tokenized deposits that can operate within traditional online banking systems.
- The platform supports stablecoin compliance under the GENIUS Act and has been tested through pilot programs in payments and supply chain use cases.
Custodia, a Wyoming-based crypto-friendly bank, and Vantage, a community bank based in Texas, have collaborated to introduce a “turnkey accretive solution that integrates tokenized deposits and stablecoins directly into the traditional online banking environment,” a Oct. 23 press release said.
For those unaware, tokenized deposits are digital representations of real bank deposits that are recorded on a blockchain.
The unnamed platform operates on a “patent-protected framework” that allows banks to issue digital tokens functioning as both tokenized deposits and stablecoins, leveraging blockchain technology’s speed and cost efficiency without banks having to relinquish control or expose themselves to the “risk of disintermediation.”
Vantage Bank, working in partnership with Custodia, has invited banks and credit unions to “join the consortium” that will allow them to “securely tokenize deposits while maintaining full control of [their] own wallet for both tokenized deposits and payment stablecoins.”
The wallets are hosted on Custodia’s “bank-grade blockchain platform,” which, as previously reported by crypto.news, received the SOC 2 Type II compliance certification. SOC 2 is a cybersecurity compliance framework by the American Institute of Certified Public Accountants that provides an audit and report on an organization’s internal security controls.
The new solution also leverages payment platform Infinant’s Interlace network and offers financial institutions of any size a way to issue and manage compliant digital tokens, especially as Custodia is a permitted payment stablecoin issuer under the GENIUS Act.
“By ensuring tokens remain within the banking environment, the model helps preserve the advantages of tokenization while encouraging deposits to remain in, or return to, the issuing institution,” the banks said.
The platform has been in the works since early 2023 and has already been tested through a series of pilot programs focused on real-world use cases, such as cross-border payments, supply chain settlement for manufacturers, and flexible payroll options for service sector businesses, among others.
U.S. Banks push back against stablecoins
Earlier this year, several major U.S. banking groups began urging lawmakers to amend the GENIUS Stablecoin Act, warning that the legislation contains a rewards loophole that could allow crypto platforms to offer yield-like incentives and draw deposits away from traditional banks.
Groups such as the American Bankers Association and the Bank Policy Institute argued that the Act, while prohibiting stablecoin issuers from paying interest, does not clearly restrict exchanges or other intermediaries from offering rewards tied to stablecoin holdings.
Coinbase, one of the largest crypto exchanges in the U.S., dismissed those concerns last month, arguing that banks are more concerned about protecting their multi-billion dollar revenue that is generated via annual payment processing fees.
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