Custodia Bank and Vantage Bank have introduced a groundbreaking digital token system that allows a single token to function interchangeably as an FDIC-insured bank deposit and a stablecoin on a public, permissionless blockchain. This innovative solution, operating under the Hazel Network, aims to bridge the gap between traditional banking infrastructure and blockchain-based payment networks, offering a regulated and secure pathway for digital asset transactions.
The core of this system is a unique digital token that, when within the member bank network, behaves as a traditional bank deposit, keeping customer funds on the issuing bank's balance sheet. However, when this token moves outside the network for broader blockchain transactions, it seamlessly toggles into a compliant stablecoin. This dual functionality is a significant departure from existing stablecoin models, which often operate on fragmented platforms and can lead to deposits being disintermediated from banks. By retaining deposits within the banking system and offering FDIC insurance for the deposit component, the initiative addresses key regulatory and trust concerns.
The implications for the stablecoin landscape are substantial. This bank-issued, regulated approach to digital currency offers the benefits of blockchain technology, such as instant settlement, programmability, and auditability, within the established framework of the U.S. banking system. Unlike many traditional stablecoins, which are typically issued by non-bank entities and hold reserves outside of the direct banking system, this model ensures that the underlying assets remain as bank deposits. This could significantly enhance institutional adoption of stablecoin-like functionality by providing a level of regulatory clarity and consumer protection that has been a point of contention for the broader stablecoin market.
The development follows a successful pilot phase in March 2025, where Custodia and Vantage completed the first U.S. bank-led tokenization of dollar demand deposits on a public blockchain. These tests involved real payments for logistics firms, demonstrating the practical application and efficiencies of the system, including low transaction costs and rapid settlement. The broader launch of this infrastructure was announced in October 2025, making seamless access to tokenized deposits available to community and regional banks nationwide through Custodia's bank-grade blockchain platform and Infinant's Interlace platform.
Custodia Bank, a Wyoming-chartered special purpose depository institution, has been a prominent voice in advocating for compliant digital asset innovation within the banking sector. The bank has navigated a complex regulatory environment, including the Federal Reserve's denial of its application to become a member of the Federal Reserve System in January 2023, citing concerns over novel crypto activities. Despite these challenges, Custodia, in partnership with Texas-based Vantage Bank, has pushed forward with solutions designed to integrate digital assets responsibly into the financial system.
The Hazel Network is already demonstrating its scalability and potential for wider adoption. In March 2026, Custodia and Vantage announced an agreement with Participate, a network comprising approximately 600 community and regional banks. This partnership will enable these banks to utilize the tokenized deposits for digitizing loan participations, further showcasing a practical, bank-to-bank use case for this technology. This initiative represents a significant step towards modernizing payment systems and offering programmable money within a regulated environment, potentially reshaping how financial institutions approach digital assets and stablecoins in the future.
Original announcement: Custodia Bank & Vantage Bank