Key facts
- Custodia and Vantage Bank have proposed a token that can toggle between a bank deposit and a stablecoin.
- The token operates as a deposit within the Hazel network and as a stablecoin when transferred outside.
- The system is designed to integrate blockchain payments with traditional banking infrastructure.
- The platform supports tokenized deposits, stablecoins, and other blockchain-based financial assets.
- The Hazel network is slated for a broad rollout in the fourth quarter of 2026.
- The proposal aims to allow banks to offer blockchain services without losing customer deposits.
Custodia Bank and Vantage Bank have jointly proposed a novel token designed to bridge traditional banking with blockchain technology. This token would function as a bank deposit when held within a consortium of participating banks, referred to as the Hazel network, and would convert into a stablecoin backed by cash and short-term Treasurys when moved to external users or networks.
The system, which has been operational on the Ethereum blockchain since March and is currently undergoing testing by banks, aims to support a range of tokenized assets, including deposits and stablecoins, through a shared banking infrastructure. A key feature of the proposal is that participating financial institutions, including community banks and credit unions, would not need to overhaul their existing core banking systems, as the platform is designed to operate alongside current ledgers and payment infrastructure.
This initiative emerges as banks explore avenues to offer blockchain-based payment services while retaining customer deposits, a move that could counter the growth of stablecoin issuers. The Clearing House, a banking consortium including major players like JPMorgan Chase, Bank of America, and Citigroup, is reportedly planning its own tokenized deposit network for launch in the first half of 2027. Additionally, banking groups are actively opposing certain provisions in proposed legislation, such as the CLARITY Act, which they fear could allow non-bank entities to compete for deposits without the regulatory oversight of a bank charter.
Custodia and Vantage anticipate the Hazel network will become widely available to banks and their customers by the fourth quarter of 2026. The total market capitalization of stablecoins currently stands at approximately $315 billion, an increase from about $251 billion a year ago, according to DefiLlama data.