Citigroup Launches Crypto Product And Crypto Custody Solution
Major international bank Citigroup has announced it will be launching a proprietary cryptocurrency investment product, Digital Asset Receipts, and crypto custody solution.
According to a report by Business Insider, Citigroup is preparing to offer crypto custody solutions to institutional investors. The investment bank has announced that it developed a new digital receipt-based system for investing in cryptocurrencies.
Investment options based on DAR
The bank is reportedly offering a new investment option based on Digital Asset Receipts or DARs. The DARs will be the virtual cryptocurrency certificates that the bank will offer to its investors.
These certificates guarantee the buyer indirect ownership of cryptocurrency tokens in their name. Sources close to the matter stated that the cryptocurrency itself will be in possession of the bank which issued the depository receipt.
“In this case, the cryptocurrency will be held by a custodian and the DAR will be issued by Citigroup.”
The investor can then hold the DAR as a digital asset in their online account. Citigroup will be in charge of maintaining the books and keeping track of who bought or sold the cryptocurrency.
The DAR trading option by Citigroup is promising to be the most direct way for an investor to trade cryptocurrency without having to actually own cryptocurrency, one of the sources added.
Since existing regulatory frameworks already cover this trading mechanism, it is seen as a more secure and convenient mode of trading cryptocurrencies by institutional investors.
Institutional tools bring liquidity to the market
One of the biggest problems that face the cryptocurrency market is illiquidity. Some have attributed this problem, alongside volatility and lack of regulation, for being the main reason why traditional institutional investors are reluctant to invest in this market.
Even so, this year has seen the rise of institutional products such as crypto custody and the proposed Bitcoin ETFs. These products are aimed at luring institutional investors and many experts believe it will bring the necessary liquidity to the market.
The U.S SEC has been playing hardball with the Bitcoin ETF proposals submitted so far, citing lack of regulations in the market. There is optimism that things would change, though some expect approvals to come by next year.
Bakkt is another product that the crypto world is highly anticipating. The company is building an open, seamless global network which will make it possible to buy, sell, store and spend digital assets simply, safely and efficiently.
It is still unclear if the SEC or any other financial authority will classify the DAR and if Citigroup will need to secure approval from authorities to offer such a product.