Bitcoin Derivatives Technology

Citigroup Preparing New, Less-Risky Crypto Product for Investors

Tony Spilotro | September 10, 2018 | 7:00 pm
Citigroup
Bitcoin

Citigroup Preparing New, Less-Risky Crypto Product for Investors

Tony Spilotro | September 10, 2018 | 7:00 pm

New York-based multinational financial services and investment bank, Citigroup, has reportedly created a new, less risky way of investing in cryptocurrencies in hopes of potentially luring investors who are still on the fence and reluctant to invest in the space due to the risks associated with crypto assets.

Citigroup Has Created the Digital Asset Receipt

According to a new report from Business Insider, citing sources “with knowledge of the project,” American banking giant Citigroup has developed what it calls the Digital Asset Receipt – something that Business Insider says “may be a game changer for the industry.” The project is said to be a collaboration between the Citigroup’s capital markets origination team and depository receipts team.

The new Digital Asset Receipt (DAR) is a new investment instrument Citigroup has allegedly developed that allows risk-averse investors to get into crypto asset investing, without actually owning them, and therefore being responsible for their custody. Crypto asset security and storage is notoriously more complicated than with traditional assets, and due to their design and value potential, have become a target for cybercriminals.

The way Citigroup’s DAR works resembles an American depository receipt – a long-standing U.S. investment product that allows investors to own foreign stocks that aren’t listed on regular U.S. exchanges. A bank holds the foreign stock, and the investor in said foreign stock is issued a depository receipt indicating ownership of the asset.

After an investor buys into Citigroup’s DAR, the bank would then notify a long-trusted Wall Street clearing and settlement service, the Depository Trust & Clearing Corp., that a Digital Asset Receipt was issued. The source explained that this extra step provides a layer of trust for investors, as their assets will be held and trackable in a long-standing system that they’re already comfortable with.

Citigroup is said to have begun reaching out to partners they’re considering working with for the new instrument, but it’s not clear when the bank may launch the Digital Asset Receipt, or where they are in the product’s development.

Trust and security are the primary hurdles said to be preventing big Wall Street institutional investors from entering the cryptocurrency market. Such an instrument may play an important role in the growth of the cryptocurrency market as big money asset managers and hedge funds consider less risky ways to enter the space.

Citigroup hasn’t always been willing to allow their customers and clients to invest in cryptocurrencies. Earlier in 2018, Citigroup joined JPMorgan, Bank of America, and other large banks in banning their customers from buying cryptocurrencies like Bitcoin and Ethereum with their credit cards, citing high risks associated with the price volatility cryptocurrencies experience.

These bans may have saved late-comers to the cryptocurrency bull run in 2017 a lot of additional financial woes. Cryptocurrency prices have continued to reach new lows throughout 2018, leaving many investors scorn.

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