Citibank is entering the cryptocurrency custody market, targeting stablecoin collateral
Wall Street financial giant Citigroup is actively positioning itself in the cryptocurrency market, planning to offer cryptocurrency custody and payment services, hoping to seize market opportunities under the Trump administration's friendly regulatory policies. Biswarup Chatterjee, head of global partnerships and innovation in Citigroup's service division, revealed to Reuters that the bank's initial focus will be on providing custody services for 'high-quality assets supporting stablecoins.'
Chatterjee stated: 'Providing custody services for high-quality assets supporting stablecoins is the first option we are considering.'
U.S. stablecoin regulation now requires issuers to hold an equivalent, audited reserve for each issued token. Citigroup is eyeing this business opportunity, considering providing custody services for related collateral instead of directly issuing stablecoins. The bank is also exploring custody services for cryptocurrency-related exchange-traded products, including Bitcoin and Ethereum ETFs.
Challenging Coinbase's market dominance, targeting ETF custody opportunities
Citigroup's move will directly challenge Coinbase's dominance in the cryptocurrency custody market. Reports indicate that Coinbase currently controls about 80% of the stablecoin reserve custody services market and provides similar services for about 80% of existing cryptocurrency ETFs in the U.S.
Chatterjee pointed out that the largest Bitcoin ETF, BlackRock's IBIT, currently manages over $88.2 billion in assets. He emphasized: 'Custody of equivalent digital currencies is needed to support these ETFs.' According to Bitbo data, 12 U.S. spot Bitcoin ETF issuers currently hold over 1.29 million Bitcoins, accounting for about 6.17% of the total circulating supply.
Source: Bitbo. 12 U.S. spot Bitcoin ETF issuers currently hold over 1.29 million Bitcoins, accounting for about 6.17% of the total circulating supply.
Bitcoin ETFs have seen a surge in popularity since their launch in early 2024, with BlackRock's iShares Bitcoin Trust (IBIT) being the largest at a market value of approximately $88 billion. Ethereum ETFs have also experienced a spike in fund inflows after a slow start, with BlackRock's Ethereum fund becoming the third-fastest in history to reach $10 billion in assets.
Further Reading
In less than a year! BlackRock's Ethereum ETF's managed scale surpasses $10 billion, creating the third-fastest record in history.
Integrating stablecoin payment features to accelerate international transfer services
In addition to custody services, Citigroup is also exploring the use of stablecoins to accelerate payment processing, especially considering that traditional banking channels can take several days. The bank has already provided tokenized dollar payment services, allowing easy transfer of currency between global accounts using blockchain networks.
Chatterjee revealed that they are developing services that enable customers to send stablecoins between accounts or convert them to fiat currency for instant payments. This development once again highlights traditional financial giants' growing interest in the cryptocurrency industry, as JPMorgan and PNC Bank also reached agreements with Coinbase last month to offer cryptocurrency services to customers.
Citigroup's executive team stated that when providing cryptocurrency custody services, they need to ensure that these crypto assets are used for legitimate purposes prior to acquisition and intend to enhance network and operational security to prevent theft and ensure safe custody.
Not the first foray into the crypto industry, Trump policies boost market confidence
Citigroup's exploration of custody and payment services is not the first foray into the cryptocurrency market. Earlier this year, the bank partnered with Switzerland's SIX Digital Exchange to improve private markets through tokenization using blockchain technology. Citigroup has been focusing on tokenization since 2023, describing the technology as the next 'killer application' for cryptocurrencies, estimating that the market could be valued at $5 trillion by 2030.
According to a report from (Crypto City) in July, Citigroup is also one of several Wall Street giants, including JPMorgan, Wells Fargo, and Bank of America, exploring the possibility of issuing a joint stablecoin. The latest report from Ripple, CB Insights, and the UK Blockchain Technology Centre ranks Citigroup as one of the most active institutional investors in blockchain companies, with 18 transactions conducted between 2020 and 2024.
Source: Ripple. Citigroup has been listed as one of the most active institutional investors in blockchain companies, having conducted 18 transactions between 2020 and 2024.
Traditional financial institutions are encouraged by the Trump administration's efforts to provide regulatory clarity for the cryptocurrency sector, extending to key stablecoin legislation such as the U.S. Securities and Exchange Commission and the recently passed U.S. (GENIUS Act). In July, the House passed three major bills, including the (Digital Asset Market Clarity Act) (CLARITY Act) and the (Anti-CBDC Act), providing a clearer legal framework for the development of the cryptocurrency market.
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'Citigroup is entering the crypto space! Plans to launch cryptocurrency custody services, targeting stablecoin collateral and ETFs' This article was first published in 'Crypto City'
