Table of Contents
- A New Service For Institutional Clients
- Testing In Partnership With Maersk
- Citi Continues Foray Into Blockchain And Digital Assets
Citi has announced the introduction of Citi Token Services, which will tokenize client deposits. This means they can be sent anywhere in the world in an instant.
The announcement comes as Citi continues to explore blockchain and digital assets.
A New Service For Institutional Clients
Citi Token Services uses blockchain technology and smart contracts to deliver digital asset solutions for Citi’s institutional clients. The service will integrate tokenized services and smart contracts into Citi’s global network, significantly upgrading trade finance and cash management capabilities. According to Citi’s announcement, institutional clients require ‘always-on’ programmable financial services. Citi Token Services can provide cross-border payment liquidity and automated trade finance solutions on a 24/7 basis. Speaking about the service, Global Head of Services Shahmir Khaliq stated,
“Digital asset technologies have the potential to upgrade the regulated financial system by applying new technologies to existing legal instruments and well-established regulatory frameworks. The development of Citi Token Services is part of our journey to deliver real-time, always-on, next-generation transaction banking services to our institutional clients. 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.”
Ryan Rugg, the Global Head of Digital Assets for Citi’s Treasury and Trade Solutions Business, stated that the new service would allow institutional clients to use cash, enabling the transfer of funds immediately and efficiently.
“[If] you’re a large multinational client where you have multiple bank accounts in multiple different regions across borders, and you keep buffers of cash in each of these regions, it’s really an inefficient use of cash. If it’s… 5:00 p.m. in the U.S. and 5:00 a.m. in Singapore, but you need to get money there, you can send that immediately, within seconds.”
Testing In Partnership With Maersk
Citi will use smart contracts to automate all trade processes. It has already worked with Maersk and a canal authority to digitize a solution that would serve the same purpose as bank guarantees and letters of credit. The pilot successfully demonstrated tokenized deposit transfers, providing instant payments to service providers via smart contracts. The Regional Treasury Manager for the Americas at Maersk, Marie-Laure Martin, stated,
“We are pleased to have collaborated with Citi in the successful test pilots for the guarantee solution using digitized tokens and smart contracts. The innovative solution has promising applications for trade finance.”
Rugg explained that the company prefunded a smart contract with digitized tokens. The tokens were automatically paid out when it received the agreed-upon services from a canal authority. Citi Token Services has also been applied to a global cash management pilot. This would enable clients to transfer liquidity between Citi branches 24/7. Rugg explained,
“Citi Token Services provides corporate treasurers with a new tool to manage global liquidity on a just-in-time, programmable basis. Frictions related to cut-off times and gaps in the service window will be reduced. Our solutions within the Citi network are complemented by inclusive and open industry collaboration on initiatives like the Regulated Liability Network. We are excited about both the potential for shared ledger technology to update Citi services and the broader financial system in partnership with regulators and industry peers.”
Citi Continues Foray Into Blockchain And Digital Assets
Crypto has been in limbo for much of the year, with prices remaining stagnant. However, tokenizing real-world assets using blockchain technology has generated considerable excitement. According to Bernstein, financial entities that wish to be a part of the modernization of financial markets must use blockchain technology. It also added that it predicts around $5 trillion worth of real-world financial assets being tokenized on the blockchain in the next five years.
Citi’s announcement makes it one of the most significant financial institutions to foray into digital assets. Several others have also made their way into the crypto space. This includes investment manager Hamilton Lane, which has launched three tokenized funds. Others, such as KKR, have tokenized a part of an equity fund in partnership with Securitize. Franklin Templeton has launched a mutual fund that settles transactions and records ownership data across blockchains. Banking behemoth JPMorgan Chase has also launched a bank-led blockchain platform called Onyx to focus on international trade.
Citi has stated that it will be using a private blockchain for its services. Rugg explained that whether Citi would ever use a public blockchain in the future would depend on how regulations play out.
“If regulation changes and regulators get comfortable with the public, we will definitely go down that route, but right now, from a regulatory standpoint, we’re sticking with permissioned.”
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.