Custodia Bank and Vantage Bank have introduced a new deposit token network called Hazel, designed to seamlessly bridge traditional bank deposits with stablecoins. The proposal, detailed in a white paper released on June 18, envisions a token that functions as a bank deposit when held within the network and automatically converts into a stablecoin backed by cash and short-term U.S. Treasuries when transferred externally.
The Ethereum-based system has been live since March 2025 and is currently undergoing testing with a select group of participating banks, with a full launch targeted for the fourth quarter of 2026, pending regulatory approvals. The network operates alongside existing banking infrastructure, allowing institutions to offer blockchain-based payment services without overhauling their core systems.
The move comes as traditional financial institutions increasingly explore tokenized deposits to retain customer funds amid the rising stablecoin market, which has grown to roughly $315 billion. The Clearing House, owned by major banks including JPMorgan Chase, Bank of America, and Citigroup, is also preparing a tokenized deposit network expected in early 2027, highlighting an industry-wide shift. Custodia’s initiative arrives after years of regulatory disputes, including a recent court rejection of its challenge against the Federal Reserve for a master account.
If successful, Hazel could simplify the movement of funds between bank accounts and digital wallets, reduce transaction costs, and provide regulators with a compliant framework for stablecoin integration within the banking system.
