Citigroup Planning Innovative Crypto Trading Mechanism

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Citigroup Planning Innovative Crypto Trading Mechanism

Another major investment bank has opted to experiment with cryptocurrencies. Citigroup Inc. (C) of New York City has devised a new digital receipt-based method for investing in cryptocurrencies such as Bitcoin, according to a source familiar with the work.

ADR-like Crypto Offering by Citi

According to Business Insider, Citi’s product is based on digital asset receipts, or DARs. Such DARs will be virtual crypto certificates issued by Citigroup to cryptocurrency investors, allowing them to indirectly acquire cryptocurrency assets in their name. Citigroup will function as an agent, issuing DARs to interested crypto investors in the quantities they choose. Because the suggested working mechanism is thought to come within the scope of the legal framework, it provides for a reasonably safe and easy manner of cryptocurrency trading for common participants.

DARs would function similarly to American depositary receipts (ADRs), which are negotiable certificates issued by a U.S. bank that reflect a fixed number of shares in a foreign firm listed on a U.S. market. The foreign stock is kept by the bank that issued the depositary receipt. In the case of DARs, the cryptocurrency tokens will be held securely by a separate cryptocurrency custodian, ensuring institutional-level security for investors’ crypto assets, as opposed to holding them in their own individual wallets, which may be vulnerable to theft, hacking, and loss of private keys. The investor may simply keep the DAR in their online accounts as a digital holding, akin to keeping a share in a demat account. The bank will keep the appropriate books and records on who purchased and sold which coin. (See also: Goldman Sachs Is Considering Launching a Crypto Custody Service.)

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Citi is one of the world’s major ADR issuers, with a long history of issuing ADRs dating back to 1928. Similar DAR-based offerings may provide a much-needed regulatory-compliance layer to bitcoin investments.

It is uncertain how the American financial authority would categorize such a DAR-based transaction and if it will get permission. The Securities and Exchange Commission (SEC) of the United States has repeatedly rejected various petitions seeking clearance for cryptocurrency-based exchange-traded funds (ETF).(For more information, see When Will The SEC Approve A Bitcoin ETF?)

If Citi’s DAR-based product is approved, it will be a major changer in the bitcoin trading sector.

Investing in cryptocurrencies and Initial Coin Offerings (“ICOs”) is very dangerous and speculative, and neither Investopedia nor the author suggest that you do so. Because every person’s circumstance is different, a knowledgeable specialist should always be contacted before making any financial choices. Investopedia makes no guarantees or warranties about the accuracy or timeliness of the information provided on this site. The author owns no cryptocurrencies as of the day this post was published.

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