With the introduction of a new token service, the largest US investment banking behemoth Citigroup has made its first significant step into the world of cryptocurrencies and blockchains as it seeks to use distributed ledger technology (DLT) to enhance its product offerings.
The bank noted in a statement on Monday that Citigroup’s new Citi Token Services is a tokenization solution for institutional clients – customer deposits are turned into digital tokens that can be transported around the world immediately.
Instead of using a public blockchain, Citi Token Services uses a blockchain that will be privately owned and maintained by Citigroup.
Shahmir Khaliq, Citigroup’s Global Head of Services, stated that the creation of Citi Token Services is a step in the company’s effort to provide its institutional clients with real-time, always-on, next-generation transaction banking services.
New Blockchain from Citigroup Won’t Excite Crypto Purists
The launch of Citigroup’s new private blockchain-powered solution for institutional clients is just another example of the DLT’s compelling use case, but it is unlikely to thrill many crypto purists.
The primary idea that has motivated the construction of the most frequently used cryptocurrencies, such as Bitcoin (BTC) and Ether (ETH), is that their blockchains are 1) public and permissionless, 2) transparent and open source, and 3) decentralized.
None of these things are likely to apply to Citigroup’s private blockchain, which will underpin its new tokenization business.
Additionally, competition from private blockchains operated by institutions like Citigroup that do not uphold any of cryptocurrency’s fundamental principles may eventually cause demand for public blockchains to decline.
Continued Institutional Adoption
While critics and crypto purists are unlikely to applaud Citigroup’s new product, it fits with a significant trend in traditional finance: major institutions are becoming more interested in crypto, whether it be in the underlying technology or in existing digital assets.
Recently, Deutsche Bank said that it has joined forces with Taurus, a company that provides digital asset custody services, to work on tokenization.
Since June, dozens of large asset managers have submitted applications to establish Bitcoin Exchange Traded Funds (ETFs), including BlackRock, Fidelity, and Vanguard. If successful, this would significantly lower the barrier for conventional investors to allocate a portion of their portfolios to cryptocurrencies.
PayPal also intends to launch PayPal USD (PYUSD), a stablecoin tied to the US dollar that may be a significant entry point for users and companies into the cryptocurrency market.
