Citigroup has made major crypto news with its latest move, one that should position itself as one of the leaders in the digital assets space. It announced recently that it plans to further explore payment services as well as stablecoin custody.
The move itself comes in the wake of a law recently passed by U.S. Congress. The belief within Citigroup is that it unlocks the potential for new opportunities for crypto, especially within the stablecoin space. These opportunities could potentially reshape settlements, payments, and even the financial infrastructure.
A Huge Move for Digital Asset Adoption
Adoption is one of the major driving factors for a digital token. The more entities adopt it as a viable investment and/or form of payment, the more trusted it becomes. In turn, it becomes a more trusted asset, combatting some of the inherent volatility that has traditionally dominated the cryptocurrency market.
Traditional financial institutions like Citigroup continue to embrace greater blockchain technology. This move by Citigroup only serves to underscore the convergence of crypto with conventional banking. What was once seen as something that could be observed from afar, crypto is becoming the wave of the future.
The move by Citigroup is seen as a direct challenge to the overwhelming grip on crypto ETF custody that Coinbase currently has. Citigroup made known its plans to secure high-quality reserves, supporting stablecoins and backing digital assets that underpin exchange-traded products.
GENIUS Act a Pivotal Factor
One of the major reasons for Citigroup to explore stablecoin custody has to do with the GENIUS Act.The Act has a few key points that made the move by Citigroup possible. Let’s explore them below.
Act. king the U.S. a Digital Assets Leader
The GENIUS Act aims to make the United States a leader in digital assets. It will do this by prioritising consumer protection, which will ultimately bolster national security and strengthen the U.S. dollar’s reserve currency status.
Consumer Protection
The GENIUS Act is also highlighting consumer protection as a main goal, keeping consumers safe from bad actors within the financial marketplace. This means creating a federal regulatory system for stablecoins to ensure that they are trustworthy and stable through strong reserve requirements.
The GENIUS Act requires 100% reserve backing using liquid assets such as the U.S. dollar or any short-term treasuries. It also requires issuers to create public, monthly disclosures highlighting the composition of their reserves. Stablecoin issuers must comply and are forbidden from making misleading claims about their stablecoins.
Combatting Illicit Activity
By not only registering but also regulating stablecoin issuers, the GENIUS Act is meant to reinforce national security. This is achieved by subjecting issuers to the Bank Secrecy Act, which obligates them to establish sanctions and anti-money laundering compliance programmes complete with sanctions list verification, customer identification, and risk assessments.
This legislation is meant to improve upon the ability of the Treasury Department to fight illicit stablecoin activities. It does so by improving money laundering enforcement capabilities and sanctions evasion.
Stablecoin Custody Citigroup’s ‘First Priority’
Custody for stablecoins backed by ‘high-quality assets’ (mostly cash and U.S. treasuries) is the first priority. This step will be in compliance with the GENIUS Act’s requirements for an adequate reserve.
Citigroup is hoping that by focusing on low-risk instruments like stablecoins, it can position itself as a “safe harbour” for issuers that are seeking to navigate through tougher regulatory oversight. Citigroup also announced that it has plans to expand into real-time, cross-border stablecoin transactions. The move would build on its current blockchain-based dollar transfer network that currently links London, New York, and Hong Kong.
For bigger companies, the primary concern is about ensuring that payments go through faster and are done with lower fees, all without losing compliance. Speed and trust, particularly when it comes to digital payments, are critical. A stablecoin custody push by Citigroup could establish the kind of middle ground that most of the global firms have been seeking. Ultimately, it would blend traditional banking reliability with blockchain efficiency.
Market Growth and the Role of ETFs
It is hard to ignore the current market growth that spot Bitcoin ETFs have. US spot Bitcoin ETFs hold about 1.3 million BTC, which is a bit more than 6% of the current circulating supply. BlackRock’s iShares Bitcoin Trust (IBIT) leads the way, holding roughly $88 billion in value.
Products like Bitcoin ETFS and Ether-based products all require secure custody, which ultimately creates the kind of opening that big banks with compliance chops and scale capabilities have been looking for.
In addition to the GENIUS Act, the CLARITY market structure bill is helping large institutions like Citigroup take a much clearer stance, legally speaking. Ultimately, this opens the door for major players on Wall Street (like Citi) to get into crypto custody without having to overcome the same regulatory hurdles that may have previously slowed adoption in the past.
Everyday Crypto Access
The move from Citi really puts it into a head-to-head competition with Coinbase. The latter controls roughly 80% of the entire U.S. ETF custody market. Given that both CB Insights and Ripple ranked Citigroup as the most active institutional blockchain investor, it is a logical move.
Over the long term, Citi believes that tokenisation can be a $5 trillion marketplace by as soon as 2030. The company ETFs feels that this underscores a much larger shift, one that sees the blending of crypto-native systems with the more traditional finance infrastructure.
Setting the Trend?
The move by Citigroup is not an isolated one within the realm of traditional finance. Major financial services firms like Fiserv and Bank of America have also been at least exploring the possibility of getting into stablecoin-related opportunities. Given the more permissive regulatory environment in the U.S., this may be just the beginning.
Behind Citigroup’s strategy is a clear foundation of compliance. It has been strongly emphasised by the company that all assets involved in payments or crypto are completely free from illicit activity. Moreover, those transactions will be protected by diverse and robust security measures.
The move makes sense given the growth of the stablecoin market. With a current market value of $250 billion (according to McKinsey estimates), the expectation is that it will continue to grow at an exponential rate. Moreover, stablecoins and payment services are expected to be a pivotal factor in the merging of traditional with digital.
A Maturing Marketplace
If anything, this move by Citigroup highlights how much the marketplace is maturing. Security and compliance have taken centre stage, particularly for institutional players. For retail adoption, those same principles are critical for creating trust and improving the ease of access that can drive growth.
Whether Citigroup’s estimates by 2030 come true remains to be seen. For crypto experts, moves like these only further their bullish stance. Could this be the beginning of a greater crypto boom, one that doesn’t come with the massive drop that previous highs have carried? This is certainly a move that bodes well for the future of crypto.
