Citigroup Plans Stablecoin Services: A New Chapter for Crypto!

Citigroup Plans Stablecoin Services: A New Chapter for Crypto!

Citigroup plans to offer stablecoin custody services and other services to further develop into the crypto world. This comes amid political changes in Washington that are encouraging financial firms to expand in the cryptocurrency business. The focus is on the increasing importance of stablecoins, which are now being given greater consideration by traditional institutions following a new law that makes their use for payments and settlements easier. The company is exploring whether it can support the stablecoin market with its own products while expanding custody services for these digitized assets.

Stablecoins are digital currencies that are typically pegged to fiat currencies, particularly the US dollar. The new law requires stablecoin issuers to hold safe assets such as US treasuries or cash. Biswarup Chatterjee, global head of partnerships and innovation at Citigroup, said providing custody services for these assets is one of the bank's top priorities. The service sector remains a central unit of the restructured bank.

Market developments and strategic orientations

A McKinsey estimate shows that around $250 billion has been spent in stablecoins so far, primarily on cryptocurrency transactions. Citi is also considering issuing its own stablecoin, but has not yet released any comprehensive plans for digital assets. The company is also exploring providing custody services for digital assets associated with crypto-related investment products, such as Bitcoin ETFs. Reuters reports that BlackRock's iShares Bitcoin Trust IBIT currently has a market capitalization of approximately $90 billion. Coinbase has a dominant position in the crypto ETF space, acting as custodian for over 80 percent of issuers.

Citi is also exploring the possibility of using stablecoins to speed up payments, which are often time-consuming in the traditional banking system. The company already offers “tokenized” US dollar payments that use a blockchain network for settlement. Chatterjee mentions that Citi is also developing services to send stablecoins between accounts or convert them into dollars.

Criticism and concerns about stablecoins

While Citigroup's initiative responds to trends in finance, there are also significant concerns in the market itself. Many users debate the credibility of stablecoins and express reservations, particularly about USDT. Despite negative reports about USDT's stability and loss of trust after the UST incident, this stablecoin remains the most used in the crypto market. A group of users are showing interest in other stablecoins such as DAI or USDC as they could potentially challenge USDT. However, discussion forums emphasize that the popularity of a stablecoin does not necessarily guarantee its trustworthiness.

Some users now prefer to use fiat currencies when possible rather than relying on stablecoins. There is particular skepticism regarding the transparency of Tether, the issuer of USDT, and the verification of reserves. In contrast, USD Coin (USDC) is viewed by many users as more trustworthy because it is supported by well-known institutions and provides appropriate evidence of USD holdings.

Overall, it is clear that traditional financial institutions such as Citigroup are responding to the challenges and opportunities of the crypto world, while deep skepticism and uncertainty about the stability of stablecoins continues to prevail in the market.