Citigroup Weighs Custody Role for Stablecoin and Crypto ETF Collateral

Citigroup is showing an unexpected interest in stablecoins and crypto ETFs; it might offer custody services for these assets’ collateral.

Stablecoins might be the more viable option, as Coinbase already has an overwhelming head start in the ETF collateral market. Even if these plans don’t work out, the firm is nonetheless considering other stablecoin pilot programs.

Citigroup’s Collateral Plan

Citigroup, one of the US’ largest banking conglomerates, has shown an interest in stablecoins on several recent occasions. After predicting that this market will reach $3.7 trillion by 2030, the firm considered launching a stablecoin last month.

According to a new report from Reuters, Citigroup is exploring these plans again, with a twist.

US stablecoin regulation now mandates that issuers hold equivalent and audited reserves for each token they issue. Instead of offering a stablecoin itself, Citigroup is considering custody of the relevant collateral.

Firms like Tether have chosen some strange methods to custody their assets, but a bank would have plenty of infrastructure for the challenge:

“Providing custody services for those high-quality assets backing stablecoins is the first option we are looking at,” claimed Biswarup Chatterjee, global head of partnerships and innovation for Citigroup’s services division. Crypto ETFs are also a possibility, as “There needs to be custody of the equivalent amount of digital currency to support [them].”

Other New Stablecoin Ventures

Custodying Bitcoin ETF collateral could be a highly profitable business, especially since the issuers are buying so many tokens.

However, there might be a problem with this plan. According to Reuters, Coinbase currently dominates 80% of stablecoin reserve custody services, and it would contest Citigroup’s competition quite strenuously.

Still, there are many types of crypto collateral, and the firm has many options if it wants to pursue this.

Meanwhile, Citigroup might still engage with the stablecoin market. It’s considering using this technology to speed up payment channels, especially between international clients. President Trump’s laissez-faire crypto reforms make this idea much easier.

For now, though, Citigroup won’t commit to any concrete strategies. The bank’s public comments on the subject are encouraging, but it could still back away from this sector altogether.