Citigroup Inc. may offer some services related to custody for stablecoins. A senior executive at Reuters confirmed this. This is the latest sign that Washington’s policy changes are encouraging large financial institutions to enter cryptocurrency.
US Bank does not stand alone when it comes to its interest in the stablecoins market. It joins other legacy players such as Fiserv and Bank of America who are also considering moves.
The move comes after the passage of a law allowing stablecoins for large-scale use in payment, settlement and financial services.
The US dollar is the most common stablecoin.
This legislation allows custody banks to manage these reserves. It requires that issuers back their coins with secure assets such as US Treasury bills or cash.
Citigroup Services’ global head of partnership and innovation, Biswarup chatterjee said: “Providing custody service for high-quality assets that back stablecoins would be the first option.”
Citi’s digital assets and core services
Citigroup’s Services business, including treasury management, cash management and payments for large corporations, is a major component of the company despite its constant restructuring.
McKinsey estimates that more than $250 billion worth of stablecoins has been created to date. However, they have primarily been used for bitcoin exchanges.
Citigroup revealed last month it would be exploring the release of a stablecoin. However, it hadn’t previously disclosed its entire digital asset strategy.
Bank is looking into custody services of digital assets to support investment products based on cryptography.
Asset managers created several similar products since the Securities and Exchange Commission (SEC) approved exchange traded funds that track the spot price for bitcoins last year.
BlackRock’s iShares Bitcoin Trust is currently valued at over $90 billion.
Chatterjee says that the ETFs need to have custody of an equivalent amount of digital currencies.
Coinbase dominates the crypto ETF market, according to its company. It is now the custodian of more than 80%.
Tokenisation and stablecoins allow for faster payments
Citigroup investigates the use of stablecoins for speeding up payment. In the banking industry, it is not uncommon for cross-border payments to take several days.
The bank offers “tokenised US dollar payment” that uses blockchain technology for transfers between New York, London and Hong Kong accounts around the clock.
Next, clients will be able to convert stablecoins into dollars to make quick payments or send them across multiple accounts. Chatterjee said that Citi has been discussing with its clients the potential uses of these services.
Considerations for Regulatory Shift and Compliance
The current US government has become more permissive with the regulation of the crypto industry. Initially, the administration was cautious about allowing big financial institutions to enter the volatile sector.
Although the policy change has enabled banks to expand into new products involving cryptography, compliance requirements remain high.
Citigroup will be responsible for ensuring that any crypto-assets it holds are not used to carry out criminal activities before they were acquired.
Chatterjee stated that organizations need to improve cybersecurity and control around operational protections.
For international transfers, stablecoins will be subjected to the existing rules, such as anti-money laundering laws and currency controls.
The issue of stablecoins is still in the discussion
Chatterjee said that while Citigroup is currently focused on services and custody related to stablecoins Chatterjee indicated the option of creating their own stablecoin.
In response to regulatory clarity, the expansion of markets, and changing client demands, the bank evaluates its participation in an expanding ecosystem for digital assets.
These measures, if pursued by a major US bank, would represent one of the largest in the sector for stablecoins, and indicate a convergence between blockchain-based payment systems and traditional finance.
The post Citigroup considers stablecoin services and custody amid US crypto regulations may be updated as new information unfolds.
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