Token to Switch Between Bank Deposits and Stablecoins Gains Momentum

Custodia and Vantage Bank have proposed a token that automatically switches between a bank deposit and a stablecoin as it moves between participating banks and external users. The token, part of the Hazel network, would operate as a deposit issued by a participating bank when held within the consortium and as a stablecoin backed by cash and short-term Treasurys when transferred outside the network.

The companies said the system has been running on Ethereum since March and is being tested by participating banks ahead of a broader rollout planned for later this year. The platform aims to support tokenized deposits, stablecoins, and other blockchain-based financial assets through a shared banking infrastructure.

According to Custodia and Vantage Bank, participating institutions would not need to replace existing core banking systems, with the platform operating alongside current ledgers and payment infrastructure. The companies said it was designed for banks and credit unions of all sizes, including community banks, and aims to let institutions participate in tokenized payments without moving customer deposits outside the banking system.