Citigroup has big plans to ensure that Wall Street clients can access the unregulated cryptocurrency market, including Bitcoin, according to an unnamed insider. The bank will offer DARs which are similar to an American Depositary Receipt (ADR). This certificate from a U.S. bank represents a set amount of shares in a foreign stock that is being traded.
According to the source, the bank will offer their own form of this certificate, a digital asset receipt or DAR so that trading can occur even without ownership of the coins that are being traded. This effort is designed to ensure that trading cryptocurrency meets US financial regulations and allow Wall Street investors to enter the market. In doing so, the bank will also make trading crypto, comparatively, safe for investors.
How will these DARs function? As already mentioned, they will operated in the same or a similar way to ADRs. A completely separate custodian would hold the crypto.
Despite the fact that this set up is designed to meet US regulations, it’s currently unclear whether or not it will be accepted. Up until now, the Securities and Exchange Commission has taken a hard stance on virtual currency, due to security issues. Various other proposals for these types of exchanges have been completely dismissed. As well as this, the SEC has suspending trades on crypto-linked exchange-traded notes. The reason given for this was confusion amongst investors trading the assets.
Regardless, according to the same source Citigroup is planning to notify the Depository Trust & Clearing Corporation. The organization operates as the Central Securities Depository for the US, providing evidence that Citigroup of preparing to launch this plan and provide a legitimate way for investors to get involved. Indeed, the bank is looking to make sure that investments can be tracked using a similar system to the one that they are used to.
Many investors are wondering why Citigroup is leaning towards an ADR approach, but this actually makes perfect sense. After all, the bank is one of the largest issuers of ADRs around the globe.
This isn’t the first time that there have been movement by Citigroup towards crypto support. Citi analyst Josh Levin released a report in August, suggesting there was great interest in crypto by the bank and that investors should be open to possibilities on this market.
As well as this, Citigroup banned purchases of Bitcoin via credit cards earlier in the year.
Many banks have attempted and struggled to offer Bitcoin trading because of the issues with acting as a custodian. Citigroup have a clear plan to address this issue. First firms buy Bitcoin and trust it with a custodian that they choose. These firms are provided with DARs, allowing them to trade with brokers on the market. Investors can then sell or buy the same receipts allowing them a clear, simple way to open trading on the market.
Interestingly, the news that Citigroup were planning this came on the same day that the SEC stated trading on Bitcoin and Ether ETNs would be suspended temporarily. While currently still only rumoured investors should expect official movement on these plans in the near future.
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