While it took a Texas partner to help make it happen, Wyoming has racked up another first for its digital asset sector — and managed to beat a number of much larger New York banks to the punch.
Multiple large New York banks have recently announced plans for stable tokens for U.S. dollars to travel to and from the digital world, riding on the heels of a newly installed and crypto-friendly Trump administration.
In fact, the Trump family’s World Liberty Financial announced similar plans Tuesday, working with a Texas bank.
But Wyoming-based Custodia Bank has beaten them all to the punch.
Working in partnership with Texas community bank Vantage Bank, Custodia Bank completed a series of eight transactions that tokenized U.S. dollars using its patented Avit stablecoin.
The money was sent out into the digital world onto the Ethereum platform and back again in a 100% regulatory-compliant manner, Custodia Bank CEO Caitlin Long told Cowboy State Daily.
“We beat the big banks to the market, which I don’t think many in the banking industry were expecting, given recent statements by the big New York banks,” she said. “I do lament that it was a Texas community bank, and not a Wyoming community bank, that approached us to do this first. But this has been part of Custodia’s business plan since 2020.”
The accomplishment is notable given that Custodia Bank is still fighting a legal battle for its master account, which is a bank account for banks that gives them access to Federal Reserve services.
Custodia Bank’s partner, Vantage, handled the master account aspect of the transaction, while Custodia Bank provided the digital railway for that cash to both enter and leave the Ethereum blockchain.
The money was transferred into self-custody using Avit tokens for several business-to-business transactions outside the banking system, which were recorded on the Ethereum blockchain, then transferred back to Custodia Bank for redemption into a U.S. bank deposit.
Why Go There
Long said Custodia Bank was approached by Vantage Bank because it has customers who want to be able to onboard U.S. cash onto cryptocurrency platforms and then redeposit the remaining or net funds once their business has concluded.
“The banks complied with all applicable U.S. bank regulatory requirements, including BSA/AML/OFAC,” Long said. “That necessitated designing documentation, policies and procedures that differ from those of current stablecoin issuers. Both banks worked with their respective bank regulators to ensure the success of this first-of-its-kind project.”
The string of acronyms refer to the Bank Secrecy Act/Anti-Money Laundering/Office of Foreign Assets Control.
Despite complying with rules intended to prevent money laundering or other illegal activities, Long’s patented approach still proved much faster and much cheaper than a federal wire transaction normally is.
“We did eight transactions within the span of a couple of hours, and they were all programmable,” Long said. “They could have been driven by software, rather than human intervention. That’s so much faster and more programmable than any existing payment solution, and the highest fee on our transactions was 25 cents.”
A typical fed wire transaction would cost more like $30 to $35 per transaction, Long said, and most ACH transactions take between one to three days. That means it would take a minimum of eight days to accomplish eight transactions.
“This event marks a pivotal moment in reshaping the financial landscape, demonstrating how blockchain and stablecoins can revolutionize payments,” Vantage Bank President and CEO Jeff Sinnott said. “By executing this transaction, we’re empowering banks to lead responsibly in cross-border modernization, while also leveraging the strength of the U.S. dollar and demonstrating regulators’ support for responsible innovation.”
Community Banks Are Natural Innovators
The entire process was also more secure, Long said, because of the technology that Vantage has invested in.
“That was important to us because these older, two-factor authentication technologies like SMS aren’t secure,” Long said. “A lot of people in the crypto space have had phones taken over in sim swaps, because people figured out, during the early years, that people in crypto were holding their wallets in insecure, two-factor authentication wallets on their phone.”
The way a sim-swap works is a thief impersonates the owner with Verizon, AT&T, or some other provider, taking over the phone.
Investing in technology to make transactions more secure is key, Long believes, to long-term success for this new digital technology which promises cheaper, faster transactions.
The fact that it is smaller banks achieving this kind of innovation ahead of much larger banks is not something that surprises Long. Small banks are more agile and can move faster. Throughout history, that’s enabled them to be innovative, Long said.
“Bank of America and Goldman Sachs — some of the biggest banks in the country are going to do this. And the first one out the door is a Wyoming bank, working with a community bank in Texas,” she said. “And this bank in Texas isn’t much bigger than Wyoming banks. So that’s an interesting fact in and of itself. It shows you we’re more nimble, we’re more agile, and we can move faster.”
Renée Jean can be reached at renee@cowboystatedaily.com.
