#2 Caitlin Long Wants the Stablecoin, Avit, to Be Native to the Banking World

Why It Matters

A bank‑issued stablecoin that mirrors familiar legal structures could lower friction between fiat banks and blockchain, unlocking new collateral and payment use cases. Success would signal regulatory acceptance and accelerate broader institutional adoption of digital assets.

Key Takeaways

• Avit is the first bank‑issued stablecoin on Ethereum
• Custodia raised $53 million from Coinbase Ventures and others
• Partnership with Vantage Bank aims to embed Avit in banking payments
• Custodia seeks Fed master account after Kraken unit gains limited access
• Small community banks become innovators, not just adopters, via Hazel

Pulse Analysis

Stablecoins have long promised faster, cheaper transfers, yet banks remain wary because existing tokens sit outside traditional legal frameworks. Avit tackles that gap by replicating the legal structure of a paper cashier’s check, a format banks already trust. By anchoring the token to a familiar instrument, Custodia hopes to eliminate the costly custodial layers that currently impede stablecoin collateral use, positioning Avit as a bridge between blockchain efficiency and banking compliance.

The venture behind Avit, Custodia Bank, has amassed $53 million in venture funding, including backing from Coinbase Ventures, Morgan Creek Digital, and Susquehanna Private Equity. Despite this capital, the firm wrestles with regulatory obstacles: a de‑banking episode tied to the Biden administration’s “Choke Point 2.0” and an ongoing lawsuit seeking a Federal Reserve master account. The recent limited Fed access granted to Kraken’s digital‑banking unit offers a glimpse of possible pathways, while the partnership with Vantage Bank provides the necessary on‑ramp to test Avit in real‑world payment flows.

If Avit proves viable, it could reshape how community banks approach digital assets, shifting them from passive adopters to active innovators. A bank‑issued stablecoin that functions like a digital cashier’s check would simplify collateralization, enable instant settlement, and reduce the 88 percent outflow of funds to crypto exchanges observed during the 2020 bull run. Such frictionless integration may encourage more banks to issue their own tokens, fostering a new layer of regulated digital liquidity and potentially prompting broader regulatory clarity across the U.S. financial system.