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Vantage Bank demo: tokenized deposits aim to keep local deposits but raise questions on reserves and runs
Summary
A Vantage Bank representative demonstrated the Hazel tokenized‑deposit network, arguing tokenization can keep deposits in banks and create new services; presenters warned a proportional shift could put roughly $5 billion of New Hampshire deposits at risk and urged fast‑track state licensing and statutory clarity.
A Vantage Bank representative presented the Hazel network to the Commission to Study, arguing that a bank‑led tokenization model could keep deposits on state balance sheets while enabling near‑instant settlement, programmability and new revenue sources.
The presenter opened with market figures intended to show scale: he said about $8.9 trillion in "visible" stablecoin volume transacts and that roughly $275 billion currently sits in stablecoin form. Applying a proportional scenario to New Hampshire, he estimated the state could see roughly $5,000,000,000 in commercial deposits migrate away from community banks if tokenization patterns follow national trends.
Why it matters: The presenter framed tokenized deposits as an alternative to off‑bank stablecoins that can preserve FDIC‑insured deposits while offering programmable payments, automated sweeps and new liquidity for local businesses. He warned that deposit erosion could reduce lending capacity, cost jobs and lower tax revenues in the state unless banks and regulators adopt tokenization pathways.
Details and demo: The Hazel demo showed a bank‑to‑bank transfer that simultaneously recorded a corresponding on‑chain token transaction; the presenter described an AML/compliance dashboard and said the system enforces AML/KYC checks before tokens move. He summarized the network's atomic settlement approach: when tokens cross a jurisdictional perimeter they are backed 1:1 by custodial cash so that redemptions remain supported.
Quantified local impacts cited by the presenter included a potential $160 million to $430 million reduction in lending capacity from a $5 billion deposit erosion scenario, an estimated 1,700 to 2,800 jobs at stake, and $13 million to $20 million in tax revenue that could be affected. The presenter said these numbers derive from independent studies and proportional application to New Hampshire.
Policy recommendations: The Vantage representative urged state policymakers to define tokenized deposits and stablecoins in statute, to fast‑track licensing decisions, and to keep public blockchains accessible for innovation. He said regulatory elements such as AML/KYC and record retention should be built into smart contracts to reduce friction between the banking system and on‑chain flows.
Q&A and risks: Commissioners asked whether tokenized deposits would be treated as core deposits and whether a single shared token introduces contagion risk across banks. The presenter said tokenized deposits live on a bank's balance sheet 1:1 and that redemptions to stablecoin custody require simultaneous movement of cash to custodial accounts; he acknowledged challenges in liquidity management and said banks and regulators will need enhanced analytics to monitor network dynamics. On smart‑contract integrity, he said contracts are audited and that governance, versioning and audit procedures are key.
Ending: The commission thanked the presenter and discussed next presenters; staff will post the meeting materials and minutes and the commission will continue hearings ahead of a targeted final report on Nov. 1.
