Vantage Bank and Custodia have officially released their Hazel Network white paper on June 18, 2026, detailing a breakthrough tokenized payments system that combines bank deposits and stablecoins into a single asset. The network is designed to make tokenized payments available to banks and customers in the fourth quarter of 2026, offering 24/7/365 programmable settlement that allows banks to modernize payments directly from within the regulated banking system. According to the white paper, Hazel Network features a 'Compliance by Construction' paradigm where every token transfer is automatically gated across three distinct screening layers before on-chain settlement can execute. The system operates through a single, integrated smart contract that issues a dual-character tokenized U.S. dollar, with every tokenized dollar beginning its life cycle as a tokenized deposit issued by a consortium member bank and automatically transforming between tokenized deposit and stablecoin based on who holds it.
The Ethereum-based system has been operating since March 2026 and is currently undergoing testing with participating banks ahead of the planned launch. Hazel Network functions as a digital asset sub-ledger running alongside a bank's existing core and general ledger, without requiring banks to replace legacy systems. Banks can participate through three flexible integration models, the shortest of which requires only 4-6 weeks to implement. The system is designed to accommodate banks and credit unions of all sizes, including small regional financial institutions, allowing participating institutions to continue using their existing systems while offering blockchain-based payment services. As reported by the companies, Hazel is designed to support tokenized deposits, stablecoins and other blockchain-based financial assets through shared banking infrastructure.
The central innovation in Hazel Network is a 'switching' token that behaves like a bank deposit within the banking consortium, but converts into a cash-and-Treasury backed stablecoin when transferred to external users. According to the white paper, when the token sits within the participating-banking consortium, it operates as a deposit issued by a bank in that network and carries the corresponding obligations and protections, including FDIC insurance. When it leaves the Hazel environment and reaches external parties, it would instead act as a stablecoin that is expected to comply with the GENIUS Act and be backed at no less than a 1:1 ratio by liquid assets, including cash and short-term U.S. Treasury securities. This 'dual-mode' design addresses the industry tension where banks want blockchain-based payments benefits but are wary of losing deposits to stablecoin issuers or taking on regulatory risks. The platform enables banks and credit unions of different sizes—including community banks—to participate in tokenized payments while keeping customer deposits inside the banking system.
Hazel Network places strong emphasis on compliance through its Compliance by Construction framework, which ensures every transaction passes through three layers of review before execution on the blockchain network. The system screens fiat transactions for money laundering indicators, fraud risks, and sanctions concerns, conducts blockchain analytics with automated wallet and address assessments, and utilizes on-chain sanctions screening through a dedicated sanctions oracle. Additionally, the smart contract automatically blocks transfers outside the consortium if they could exceed Custodia's programmatically verified reserve balance. Vantage, Custodia, and their integration partner Infinant have completed the first of four production-scale testing phases and are preparing for the second phase. The companies announced that the first group of participating banks will be announced soon, with several large-scale pilot projects already underway, including one involving Participate and the use of tokenized bank deposits to facilitate interbank loan participation transactions.
