Crypto-friendly banks Custodia Bank and Vantage Bank have launched a blockchain platform that allows traditional banks to issue tokenized deposits. The new system is designed to help banks use blockchain technology so they can run transactions faster while keeping customer money safe.
According to the two banks, the patent-protected system is built to give both institutions and customers the benefits of tokenization while keeping deposits safe from being moved away from banks.
“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,” the banks said in a press release.
Connecting Traditional Banking and Crypto
Tokenized deposits are digital versions of regular bank deposits issued on a blockchain and backed by real U.S. dollars held by banks. This new system lets banks use a single digital token that works as both a tokenized deposit and a stablecoin, which bridges the gap between traditional banking and the crypto world. The platform is open to banks of all sizes with full control of their digital wallets that store both tokenized deposits and GENIUS Act-compliant stablecoins.
The technology uses Custodia’s blockchain system and Infinant’s Interlace network to process transactions. This launch comes seven months after Custodia became the first U.S. bank to issue tokenized deposits on a permissionless blockchain with the help of Vantage Bank.
The introduction of tokenized deposits also puts banks in competition with private stablecoins, a market now worth about $300 billion. Stablecoins have gained more attention after U.S. President Donald Trump signed the GENIUS Act in July, which gave the market a boost. However, many banks are worried that stablecoin issuers offering interest and yields could weaken traditional banking systems.
In April, U.S. The Treasury estimated that the stablecoin market could reach a cap of $2 trillion by 2028. Custodia’s system could help banks reduce those risks and stay competitive in the digital era.
Custodia has already started testing its tokenization technology in different sectors, including cross-border payments, construction payouts, supply chain settlements, and payroll systems.
Also Read: Donald Trump Pardons Binance Founder Changpeng ‘CZ’ Zhao
