Crypto-friendly banks Custodia Bank and Vantage Bank have launched a turnkey blockchain solution allowing traditional banks to issue tokenized deposits that will work with stablecoins.
The solution enables banks to leverage blockchain’s near-instant, low-cost transactions in an interoperable manner with other banks while being able to retain customer deposits, the two banks announced in a statement on Thursday.
“The patent-protected framework is designed to provide institutions and their customers with the efficiencies and security of tokenization while safeguarding core deposits from the risk of disintermediation.”
Tokenized deposits are digital versions of bank deposits issued on a blockchain, representing real US dollars held by banks.
The initiative aims to address interoperability between crypto 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, which maintain control of their wallets containing tokenized deposits and GENIUS Act-compliant stablecoins.
The solution leverages Custodia's bank-focused blockchain and payment platform Infinant’s Interlace network. It comes seven months after Custodia became the first bank to issue tokenized deposits on a permissionless blockchain in the US with Vantage.
Tokenized Deposits Compete with Private Stablecoins
The current crypto bull market has been primarily fueled by institutional adoption, with banks and TradFi companies adopting a broad range of strategies to participate in the crypto space.
One of those areas of adoption has been stablecoins, a now $300 billion market which received a considerable boost by US President Donald Trump’s signing of the GENIUS Act in July.
However, banks have expressed concern to regulators that stablecoin issuers and their affiliates offering interest and yield on deposits may undermine the traditional banking system.
The US Treasury in April estimated that the stablecoin market could reach $2 trillion by 2028 and lead to $6.6 trillion in banking deposit outflows.
For banks, tokenized deposits could help mitigate these outflows and preserve their competitive edge as the banking industry increasingly moves toward digital solutions.
Custodia’s Solution is Already Making a Real Impact
Custodia is already running early pilot programs that leverage its dollar tokenization technology, including ones that enable cross-border payments for transportation companies and milestone-based disbursements in construction.
It is also supporting supply chain settlement for manufacturers and more flexible payroll options in service industries, it noted.