Custodia Bank and Vantage Bank are building a tokenized dollar network for US banks, aiming to give community and regional lenders a way to offer blockchain based payments without surrendering customer deposits to outside stablecoin issuers.

The network, called Hazel, is designed around a token that can operate as a tokenized bank deposit inside the bank network and as a stablecoin when used more broadly. The goal is to combine bank balance sheet deposits with the programmability and speed of public blockchain rails.

The model addresses one of the biggest concerns banks have about stablecoins. Traditional stablecoins can pull deposits away from banks because reserves sit with the issuer. Hazel is designed to keep deposits at participating banks while letting customers use tokenized dollars for faster payments, settlement, and programmable financial activity.

Custodia and Vantage first tested the model in March 2025, when they completed what they described as the first US bank tokenization of dollar demand deposits on a permissionless blockchain. The pilot included issuance, transfer, and redemption of Avit stablecoins for a bank customer.

The system later moved beyond proof of concept. In October 2025, Vantage and Custodia announced a consortium for banks and credit unions to join, describing it as a turnkey platform for tokenized deposits and stablecoins.

The technology layer comes from Infinant’s Interlace platform. Infinant says Interlace gives banks a unified framework to issue and manage tokenized deposits and GENIUS Act compliant stablecoins through existing banking and payment infrastructure.

The bank distribution channel expanded in 2026. Participate, a loan participation network with more than 600 banks, agreed to use tokenized dollars issued by Custodia and Vantage for loan participation payments and servicing.

That use case matters because it is not just a crypto trading product. Loan participations require bank to bank payments, settlement, reconciliation, and ongoing servicing. Tokenized deposits could make those processes faster and more automated while keeping them inside regulated banking channels.

The network also fits the new US stablecoin framework. The GENIUS Act, signed into law in July 2025, created federal rules for payment stablecoins, including issuer oversight, reserve standards, and compliance obligations.

Hazel is being pitched as a bank native answer to that shift. Instead of letting non bank stablecoin issuers control the next generation of digital dollars, Custodia and Vantage want smaller banks to issue programmable dollars through their own regulated infrastructure.

The challenge is adoption. Banks will need to integrate new systems, manage compliance, and convince customers that tokenized deposits are useful beyond a technical upgrade.

The opportunity is that community banks get a way into stablecoins without losing the deposit relationship. If Hazel works, it could turn tokenized deposits from a pilot project into a shared payment rail for hundreds of US banks.