Custodia, Vantage Bank Propose Token Model Switching Between Deposits and Stablecoins

Custodia and Vantage Bank have proposed a token model that automatically converts between bank deposits and stablecoins.

Cointelegraph reported on June 19 that the two firms outlined the structure in a joint white paper. The token would function as a bank deposit within bank networks and as a stablecoin on external blockchain networks.

Within the Hazel Network, which is made up of participating banks, the token is treated as a bank deposit. When it moves outside the network, it converts into a stablecoin backed by cash and short-term US Treasuries. The companies said the model could connect traditional banking infrastructure with blockchain payment networks.

Custodia and Vantage Bank said the system has been operating on Ethereum since March and is currently being tested by participating banks. A formal launch is planned for later this year.

The white paper said participating banks would not need to replace their existing core banking systems. The model is designed to process tokenized deposits, stablecoins and other blockchain-based financial assets on top of existing ledger and settlement infrastructure.

The goal is to let customers participate in tokenized payments without moving deposits outside the banking system, the companies said. Wyoming-based Custodia and Texas-based Vantage Bank said they expect the Hazel Network to open to banks and customers more broadly in the fourth quarter of 2026.

The proposal comes as banks build their own blockchain payment infrastructure in response to the spread of stablecoins. Data from DefiLlama show the stablecoin market has grown to about $315 billion from $251 billion a year earlier.