New York-based banking and financial services provider Citigroup is reportedly planning on a new service that will enable traders to invest in digital assets without risking ownership.
Although there is no official confirmation yet on this speculative move, sources familiar with the matter have told Business Insider that Citigroup will model this new service along the lines of the American Depository Receipt, a several-decades-old financial product that lets U.S. investors invest in foreign stocks that aren’t listed on the country’s exchanges.
According to the report dated Sep 9, 2018, Citigroup is developing a new product called Digital Asset Receipt (DAR). The primary objective of this rumored product seems to facilitate institutional investors such as hedge funds and asset managers an easier access to the cryptocurrency market.
But more importantly, because this new service offered through DAR plays by the laws and regulations governing the financial services sector, it is practically immune from many of the risks and shortcomings associated with the conventional crypto investment channels.
Citigroup won’t directly offer the crypto assets to its customers. Instead, it will designate a custodian who will hold the cryptocurrencies in the offering. Citigroup users will be able to invest in the fledgling asset class through this custodian in exchange for the DAR.
The report also claims that Citigroup has brought the Depository Trust & Clearing Corp. onboard with this move. This is an important step to boost further the bank’s efforts to provide customers with an additional safety cushion from the volatile crypto market.
Every time the bank issues a new DAR to a customer, it will notify the Wall Street “middlemen” about the transaction. Among other things, this will also enable investors to monitor the status of their investments in a system they are already accustomed to.
Details are still pretty sketchy at the moment as Citigroup has so far remained mum on this speculative forthcoming service. However, according to the Business Insider sources, the project is the product of a collaboration between the banking giant’s depository receipts services team and the capital markets origination team.
The sources didn’t divulge how far the project is from being market-ready. Neither could they confirm a tentative release date.
Worth noting here is that Citigroup, unlike some of its peers, has so far steered clear from getting directly involved in the crypto space. Presumably, to protect investors from the vulnerabilities the traditional crypto investment channels suffer from, including extreme volatility, frequent security breaches targeting crypto exchanges and wallets, as well as the often-exaggerated perception that crypto assets facilitate criminal behavior. The bank even ban on the use of Citi credit and debit cards for purchasing crypto assets.
Despite the initial reluctance, Citigroup continued to recruit new personnel to strengthen its internal unit overseeing the crypto space. Earlier in 2018, it listed a new job on LinkedIn seeking applications for the position of a Vice President who would monitor the use of cryptocurrencies in unlawful activities such as money laundering.
Featured image by Richard Keeling