Citi’s bank branch in the central business district of Singapore on Feb. 12, 2018.
Ore Huiying | Bloomberg | Getty Images
Citi Upgrades Services for Institutional Clients Using Blockchain Technology
Citi is upgrading some of its services for institutional clients using blockchain technology.
Tokenizing Deposits for Instant Global Transfers
The banking giant introduced Citi Token Services on Monday, which will tokenize clients’ deposits so they can be sent anywhere in the world instantly.
Ryan Rugg, global head of digital assets for Citi’s Treasury and Trade Solutions business, explained that this service is particularly beneficial for large multinational clients who have multiple bank accounts in different regions. It eliminates the need to keep buffers of cash in each region, making it a more efficient use of cash. With the new service, clients can send money immediately, within seconds, regardless of the time difference between regions.
Automating Trade Process with Smart Contracts
Citi is now using smart contracts to automate the trade process. Smart contracts are self-executing programs that run automatically when the conditions of an agreement or contract are met.
The bank tested the smart contract capability with shipping and logistics giant Maersk. By prefunding a smart contract with digitized tokens, Citi was able to automatically pay out the token once the company had received agreed-upon services from a canal authority. This automation could significantly reduce transaction processing times from days to minutes.
Tokenizing Real-World Assets using Blockchain Technology
While cryptocurrency remains in regulatory limbo and prices have been stagnant this year, there is renewed excitement about tokenizing real-world assets using blockchain technology. Bernstein predicts that about $5 trillion of real-world financial assets will be tokenized on blockchains over the next five years.
Significance of Citi’s Announcement
Citi’s announcement is one of the most significant among financial institutions exploring digital assets. Other institutions, such as investment manager Hamilton Lane and KKR, have also launched tokenized funds. Franklin Templeton has launched a mutual fund that settles transactions and records ownership data over different blockchains. JPMorgan Chase has a bank-led blockchain platform called Onyx that focuses on international trade.
Private Blockchain and Future Use of Public Blockchains
Citi is currently using a private blockchain for its new services. The use of public blockchains in the future will depend on regulatory changes and the comfort level of regulators. If regulations change and regulators become comfortable with public blockchains, Citi may consider using them.