Custodia and Vantage Bank have proposed a token that automatically switches between a bank deposit and a stablecoin as it moves between participating banks and external users.
According to a white paper shared with Cointelegraph on Thursday, the token would operate as a deposit issued by a participating bank when held within a banking consortium and as a stablecoin backed by cash and short-term Treasurys when transferred outside the so-called Hazel network.
The companies said the system has been running on Ethereum (ETH) since March and is being tested by participating banks ahead of a broader rollout planned for later this year. The platform is designed to support tokenized deposits, stablecoins and other blockchain-based financial assets through a shared banking infrastructure.
According to the white paper, participating institutions would not need to replace existing core banking systems, with the platform operating alongside current ledgers and payment infrastructure.
The companies said it was designed for banks and credit unions of all sizes, including community banks, and aims to let institutions participate in tokenized payments without moving customer deposits outside the banking system.
Wyoming-based Custodia and Texas-based Vantage said they expect the Hazel network to become broadly available to banks and their customers in the fourth quarter of 2026.
Banks seek alternatives to stablecoins
The proposal comes as banks increasingly look for ways to offer blockchain-based payment services without losing customer deposits to stablecoin issuers.
Earlier this month, The Wall Street Journal reported that The Clearing House, whose owners include JPMorgan Chase, Bank of America and Citigroup, plans to launch a tokenized deposit network in the first half of 2027, allowing banks to settle payments using blockchain-based representations of customer deposits.
Banking groups have also pushed back against legislation that could allow stablecoin issuers to offer yield-bearing products.
JPMorgan CEO Jamie Dimon recently said banks would continue fighting provisions in the CLARITY Act, a US crypto market structure bill, arguing they could let crypto companies compete for deposits without obtaining bank charters. The bill advanced out of the Senate Banking Committee in May and still requires approval from both chambers of Congress.
According to DefiLlama data, the total stablecoin market capitalization stands at roughly $315 billion, up from about $251 billion a year ago.
Source: DefiLlama