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Tokenized Deposits Are Coming

Frequently asked questions:

  1. What are the use cases for tokenized dollars?

 

Vantage’s longtime customer, DX Xpress, asked for the ability to make cross-border payments to pay truck drivers within one hour of reaching their destination, to help it recruit the best drivers. Custodia built and tested a geolocation app for bank customers to pay without human intervention and successfully tested this in production (working with regulators) in June. These announcements prompted incoming inquiries from construction companies wanting to pay contractors upon milestones, to help them recruit the best contractors; from an auto company that wants to use this technology within its semiconductor supply chain; and from a restaurant company wanting to recruit the best employees by paying for work as frequently as daily.

 

Once a bank or credit union integrates the essential blockchain primitives for wallets and custody into its platform, which Vantage provides at a minimal upfront cost, it will be empowered to innovate and address their customers' needs like never before.

 

 

  1. Can Banks pay interest on tokenized deposits?[1]

 

Yes, tokenized deposits are an on-chain representation of traditional bank deposits. Stablecoins are different, as the GENIUS Act prevents the payment of interest. However, consortium members share in the interest earned on stablecoin reserves. This is a key advantage of joining our consortium, which tightly integrates tokenized bank deposits with Avits™.

 

 

  1. Can a bank or credit union of any size benefit from joining the consortium?

 

Yes. Our model shows that joining the consortium is accretive for any bank so long as it converts 10% of its wire volume to tokenized deposits or stablecoins.

 

  1. Is there a maximum size of bank that could benefit from joining the consortium?

 

No. Our model shows that there is no size cap on banks joining the consortium. And, because Vantage plans to hold a portion of consortium member banks’ deposits in the form of T-bills rather than on-balance sheet deposits, Vantage can service community and regional banks of all sizes.

 

  1. How does your system interface with traditional banking core systems?

 

The system will have simple and light integrations for banks and their customers. A widget that can be placed in a digital banking portal and accessed via SSO will enable banks to provide tokenized deposits and stablecoin payments to their customers. We also enable integration with a bank’s core via a simple posting file to enable simple accounting with an existing core. The Bank will then be provided access to a Banker's portal to manage their customers’ deposits, payments, and onboarding activities.  

 

  1. Who handles financial crimes compliance for the tokenized dollars?

 

Vantage and Custodia have been collaborating on digital asset compliance for approximately two years. Custodia has integrated the best blockchain intelligence tools into its financial crimes compliance program, which has undergone multiple full-scope bank examinations since it launched more than three years ago, including a successful track record in Bitcoin custody. Banks will have the ability to utilize these compliance tools for tokenized dollars from the consortium.

 

  1. Is your system interoperable with other systems for tokenized dollars?

 

Yes. Philosophically, we champion open access and interoperability rather than closed systems. Accordingly, while many stablecoin issuers are building their own blockchains or proprietary “layer 2” systems, we are committed to using open-source blockchains. While most stablecoin issuers use omnibus legal structures that create their own legal frictions, we’re using a legal structure that supports interoperability within the law.

 

  1. Does a bank need to use your wallet and custody primitives, or can it use its own blockchain infrastructure?

 

Either. While we believe most banks will want to use the consortium’s default wallet and custody services, we are open to working with Banks that choose to use their own. We are working with an approved integrator, Infinant, for Banks that choose to do custom integrations beyond the widget implementation.

 

WHY JOIN OUR CONSORTIUM INSTEAD OF OTHERS:

●        Joining forces with an existing stablecoin issuer: Why would you let the fox in the henhouse, putting your core deposits at risk of disintermediation to a non-bank without much potential for the deposits to come back to you?

●        Joining forces with a banking core provider: Why would you make a multi-year vendor commitment before you understand your customers’ demand and use cases?

●        Joining forces with a SaaS provider: Why would you join a network built by anyone other than banks, for banks? Our partners have been through the wringer and have worked out kinks that crypto companies and other fintechs don’t even yet know they will face.


[1] The authors cannot provide legal or regulatory advice. Banks and credit unions should seek their own counsel’s advice on legal and regulatory interpretations.