Citigroup Plans to Offer Institutional Investors a New Low-Risk Crypto Product

U.S. multinational bank Citigroup is going to enable investors to work on cryptocurrency markets without actually having to own cryptos.

Photo: Herve Boinay / Flickr

Photo: Herve Boinay / Flickr

As it has been revealed, New York-based banking giant Citigroup is developing a new cryptocurrency product that is aimed at expanding opportunities for investors and reducing their risks.

Thanks to this new solution that is to be provided by the bank, institutional investors will have a chance to receive access to crypto markets without a necessity to own cryptoassets directly.

According to the source that preferred to stay unnamed, the bank is going to perform functions of an agent that will issue digital asset receipts (DARs), which will provide an opportunity to lead trading by proxy and will exclude direct ownership of the underlying coins from these processes.

The proposed structure will meet the regulatory regimes that exist now and will provide institutional investors with a comparatively secure way to trade in crypto. The instrument is a result of collaboration of Citigroup’s depository receipts services team and the capital markets origination team named Digital Asset Receipt.

The digital asset receipts that are to be offered by Citigroup have practically the same functioning principle as American depositary receipts (ADRs) that give investors in the U.S. to own foreign stocks that are not presented in local exchanges.

In the situation with the ADRs, a bank functions as a custodian and investors receive their depository receipts. For more than nine decades, Citigroup has been issuing ADRs for investors and has become one of the major ADRs issuers in the entire world.

But still no information regarding at least approximate date when we can expect to see the launch of the new bank’s product has been revealed yet.

Moreover, now it is completely impossible to predict the attitude of U.S. regulators toward the bank’s digital asset receipts as the U.S. Securities and Exchange Commission now is very cautious in the issues regarding all kinds of securities being linked with digital currencies and recently has rejected some ETFs proposals received from a number of crypto firms.

Banks have always been not very optimistic about offering direct crypto trading for their clients as this kind of transactions is considered to be very insecure. What’s more, there are some barriers that restrict a possibility for banks to act as custodians of digital assets.

Nevertheless, a lot of crypto firms as well as companies working in the traditional finance market have been looking for the most appropriate solutions for custody to offer.

Though earlier this year, Citigroup has taken a decision to prohibit purchases of Bitcoin via credit cards issued by the bank, now the bank’s executives believe that receipts should be perceived as the most sensible solution to offer an opportunity of direct Bitcoin trading for investors.

That’s why they have developed a scheme that is planned to be used for this kind of trading. While some companies will purchase Bitcoin and deposit it with any custodian that they prefer, the bank will offer receipts for institutional investors who will have an opportunity to trade crypto with brokers.

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