- Citigroup Inc. is making a foray into digital assets, with a new digital token service based on the blockchain system.
- Banks will enable issuance of digital money representing customers’ own funds before settling through central bank reserves on distributed ledger.
- Clients will be able to transfer liquidity between Citi branches 24/7, straight from their accounts. No digital wallets required.
Citibank has announced a new product christened Citi Token Services under the Citi Treasury and Trade Solutions (TTS), as parts of its cash management and trade finance (TradeFi) innovation. The feature is blockchain-based, leveraging smart contract technologies to bring digital asset solutions for its institutional clients.
Citibank to introduce Citi Token digital asset
Citigroup Inc. has unveiled a new feature, Citi Token Services, integrating tokenized deposits and smart contracts into the financial conglomerate’s global network of banks. The move is part of its developmental objective, “upgrading core cash management and TradeFi capabilities,” according to an official announcement.
Tailored for institutional clients, the product aims to deliver a financial service that is accessible 24/7, with customers set to enjoy cross-border payments, liquidity, and automated TradeFi solutions around the clock. It will turn customers’ deposits into digital tokens, available for instant transfer globally, with the company’s treasury and trade solutions division running the project.
Citing the conglomerate’s Global Head of Services Shamir Khaliq:
…this development goes hand-in-hand with our industry-leading work on the Regulated Liability Network to create interoperable digital asset solutions on a multi-bank basis.
The innovation introduces a new concept, though subject to debate, on whether permissioned blockchains will irreversibly change global finance.
So permissioned blockchains are going to irreversibly change global finance? Have I read that right?— Preston Byrne (@prestonjbyrne) September 18, 2023
Wonder who came up with that idea? https://t.co/SR6W9f1agh
Citibank tests a regulated liability network with the Fed
The innovative solution, which bears remarkable promise for the TradeFi sector, is part of a collaborative test pilot between Citigroup Inc., Maersk, and the Federal Reserve, to “digitize a solution that serves the same purpose as bank guarantees and letters of credit in the trade finance ecosystem.”
The network would enable Citigroup’s banking network to facilitate digital money issuance in place of funds belonging to the bank’s customers. The credit thus issued could be settled with central bank reserves on a distributed ledger later. Its success would therefore prove to the Federal Reserve (Fed) that digital currency could improve wholesale payments.
With the service accessible through Citibank’s existing system, members will not have to set up a digital wallet for the Citi Token as it will use their native accounts with the bank.
Fed turning its coat on digital assets
The involvement of the Fed as a canal authority has caught the eye of market experts, including Ripple Lawyer John E. Deaton, who critiqued the financial authority for hypocrisy – embracing the technology after fighting it vehemently.
They laugh at it, ignore it, fight it, get regulators to sue over it, and then they adopt the technology. https://t.co/a67kBO215g— John E Deaton (@JohnEDeaton1) September 18, 2023
Nevertheless, the adoption of Citi Tokens for instant global transactions shows how traditional financial institutions are embracing digital assets to improve efficiency and customer experience.
It is worth mentioning that Citigroup was recently deliberating whether to maintain partnerships with Ripple’s Metaco, with which the bank had a digital custody deal running.
#Ripple making waves?— WrathofKahneman (@WKahneman) June 30, 2023
"It wasn’t clear whether the review is linked to Ripple’s acquisition of Metaco. Ripple said...that Metaco would operate as an independent brand and be run by its chief executive officer, Adrien Treccani." https://t.co/qvdrYC6eVD
Ripple had acquired the Swiss finance technology firm for $250 million in May 2023, a year after Citigroup signed a collaboration with Metaco.
What is Ripple?
Ripple is a payments company that specializes in cross-border remittance. The company does this by leveraging blockchain technology. RippleNet is a network used for payments transfer created by Ripple Labs Inc. and is open to financial institutions worldwide. The company also leverages the XRP token.
What is XRP?
XRP is the native token of the decentralized blockchain XRPLedger. The token is used by Ripple Labs to facilitate transactions on the XRPLedger, helping financial institutions transfer value in a borderless manner. XRP therefore facilitates trustless and instant payments on the XRPLedger chain, helping financial firms save on the cost of transacting worldwide.
What is XRPL?
XRPLedger is based on a distributed ledger technology and the blockchain using XRP to power transactions. The ledger is different from other blockchains as it has a built-in inflammatory protocol that helps fight spam and distributed denial-of-service (DDOS) attacks. The XRPL is maintained by a peer-to-peer network known as the global XRP Ledger community.
What blockchain technology does XRP use?
XRP uses the interledger standard. This is a blockchain protocol that aids payments across different networks. For instance, XRP’s blockchain can connect the ledgers of two or more banks. This effectively removes intermediaries and the need for centralization in the system. XRP acts as the native token of the XRPLedger blockchain engineered by Jed McCaleb, Arthur Britto and David Schwartz.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.