NEW YORK / LONDON (IT BOLTWISE) – Two crypto-friendly banks, Custodia Bank and Vantage Bank, have launched an innovative blockchain solution that allows traditional banks to issue tokenized deposits. This development could fundamentally change the way banks interact with cryptocurrencies.
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Custodia Bank and Vantage Bank have launched a new platform that allows traditional banks to issue tokenized deposits. These deposits are digital versions of bank deposits issued on a blockchain and represent real-world US dollars. The solution aims to improve interoperability between crypto and traditional banks by introducing a single digital token that can function as both a tokenized deposit and a stablecoin.
The platform uses Custodia’s blockchain and payments platform Infinant’s Interlace network, which is specifically aimed at banks. This development follows Custodia’s pioneering work when it became the first bank in the US to issue tokenized deposits on a permissionless blockchain seven months ago. The new solution allows banks to leverage the benefits of blockchain technology, such as near-instant and low-cost transactions, while allowing them to retain customer deposits.
Tokenized deposits could be an answer to banks’ growing concerns about the impact of stablecoins on the traditional banking system. The stablecoin market, currently valued at $300 billion, could grow to $2 trillion by 2028, according to a U.S. Treasury Department estimate. This could lead to significant outflows of bank deposits, which could jeopardize banks’ competitiveness.
Custodia has already launched initial pilot programs using its technology for dollar tokenization. These include cross-border payments for transport companies and milestone-based payouts in construction. These applications demonstrate the technology’s potential to support various industries and increase efficiency.
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