Citigroup is considering offering custody services for crypto assets, including stablecoins and crypto ETFs, as these digital assets gain traction. This move signals growing institutional interest in the crypto space and comes as regulators adopt a friendlier stance toward crypto.
Citigroup's initial focus will likely be on providing custody services for "high-quality assets backing stablecoins," according to Biswarup Chatterjee, global head of partnerships and innovation for Citigroup's services division. Stablecoins, cryptocurrencies pegged to fiat currencies like the U.S. dollar, have seen increasing adoption for payments and settlements. Recent legislation requires stablecoin issuers to maintain safe assets, such as U.S. Treasuries or cash, as backing for their digital coins. This creates opportunities for traditional custody banks to provide safekeeping and administration services. Citigroup is also exploring custody services for digital assets backing crypto-related investment products, including Bitcoin and Ether ETFs.
The move into digital asset services follows the GENIUS Act, which established federal rules for stablecoins. Under this law, issuers must hold high-quality assets such as US Treasuries or cash to back their tokens, creating opportunities for traditional custody banks to safeguard and manage these reserves.
Citigroup is also exploring the use of stablecoins to speed up cross-border payments and settlements. The bank already offers "tokenized" U.S. dollar payments over blockchain between accounts in New York, London, and Hong Kong 24/7 and is developing services to let clients transfer stablecoins between accounts or convert them into dollars for instant settlement.
Citigroup's potential entry into crypto custody would position it in competition with established players like Coinbase, which currently dominates the ETF asset custody market. Chatterjee noted that the largest Bitcoin ETF, BlackRock's iShares Bitcoin Trust (IBIT), has a significant market capitalization, requiring custody of an equivalent amount of digital currency to support it. As of recent reports, IBIT holds nearly $90 billion in assets under management. The 12 U.S. spot Bitcoin ETF issuers collectively hold nearly 1.3 million BTC, which is about 6.2% of the total circulating supply.
Citigroup's exploration into custody and payment services isn't its first venture into the cryptocurrency market. Earlier in the year, the bank collaborated with Switzerland's SIX Digital Exchange to utilize blockchain technology to enhance private markets through tokenization. Citigroup has been considering tokenization since at least 2023, viewing the technology as the next "killer use case" in crypto, with estimations suggesting it could reach a $5 trillion to $10 trillion market size by 2030.
The bank intends to adopt security standards that match or exceed those used by leading custodians of crypto ETFs and will verify the legitimacy of all assets before acquisition. Operational and cyber protections will be strengthened to prevent theft and ensure safekeeping.
