U.S. Banks Launch Tokenized Deposit Network

Custodia Bank and Vantage Bank Texas have unveiled a groundbreaking nationwide platform that enables U.S. banks to issue tokenized deposits, expanding their earlier pilot into a fully functional network. The system allows participating institutions to create tokens representing insured deposits, effectively placing traditional bank money on a blockchain while preserving all standard banking protections and regulations. According to Custodia CEO Caitlin Long, the platform awaits final regulatory approval to begin operating at scale, marking a pivotal moment in the convergence of traditional finance and blockchain technology.

The innovation lies in creating digital dollars that maintain their regulatory status regardless of location. When held by participating banks, these tokens function as fully FDIC-insured tokenized deposits governed by standard banking rules. However, when transferred to other institutions or wallets, they behave like stablecoins. This dual functionality represents a significant advancement in financial infrastructure, enabling seamless movement between traditional and digital financial systems without compromising regulatory compliance.

The platform’s core technology involves what Long describes as “a patent-pending protocol involving both an on-chain oracle and off-chain operational controls.” This sophisticated system manages the conversion between deposit instruments and stablecoins without requiring token redemption or conversion. The key breakthrough, as Long explained, is that “the very same token, issued via the same smart contract, can change its obligor and its regulatory status as it moves through its life cycle.”

This technical architecture ensures compliance with U.S. banking laws and the GENIUS Act, which recognizes certain bank-issued stablecoins as deposit instruments rather than securities. The platform utilizes Infinant’s APIs and ledger infrastructure to manage the switching between forms, creating what Dan Dadybayo, research and strategy lead at Unstoppable Wallet, calls “a compliant settlement layer that moves insured dollars at the speed of blockchain” with the “same safety net, on new rails.”

Unlike the earlier proof-of-concept that tested Vantage’s Avit token on Ethereum, the current rollout is designed for real-world transactions and operates on permissionless networks. Long emphasized that three different test transactions used Ethereum earlier in March, with development already underway for Bitcoin integration. This approach reflects what Long describes as a “philosophical commitment to tearing down walls, not building new ones.”

The platform’s design represents a departure from the current industry trend where major stablecoin issuers and payment platforms typically build proprietary chains or push closed systems. As stated in an FAQ shared by Long, “While most stablecoin issuers use omnibus legal structures that create their own legal frictions, we’re using a legal structure that supports interoperability within the law.” This commitment to open access and interoperability could fundamentally reshape how financial institutions approach blockchain integration.

The platform’s potential impact extends beyond technical innovation to leveling the competitive playing field in banking. Dadybayo explained that “the Fed can still see the flows through participating banks, but for the first time, smaller institutions can compete on efficiency and programmability.” This represents a significant opportunity for community banks and smaller financial institutions to access the benefits of blockchain technology without sacrificing regulatory oversight.

Long confirmed that multiple banks have already committed to the platform, noting that the Federal Reserve had invited Vantage’s CEO, Jeff Sinnott, to a community bank conference where the product was “teased.” As Dadybayo observed, “If adoption grows, this could quietly become a parallel payments network built from inside the system, not against it.” This internal evolution approach distinguishes the platform from many blockchain initiatives that position themselves as alternatives to traditional banking.

The platform’s success hinges on final regulatory approval for full-scale launch, but the groundwork has been laid for what could become a transformative infrastructure in U.S. banking. By maintaining regulatory compliance while enabling blockchain efficiency, the network represents a pragmatic approach to financial innovation that bridges the gap between traditional banking safeguards and the technological advantages of distributed ledger technology.