Dive Brief:
- Citi is weighing offering its clients cryptocurrency trading, custody and financing options, Itay Tuchman, the bank’s global head of foreign exchange, told the Financial Times.
- Crypto has piqued a "very rapid" upsurge in enthusiasm among a broad range of clients, including asset managers, since August, Tuchman said. However, he added, the bank won't make any rash decisions regarding its crypto direction. "This isn’t a space race," Tuchman said. "There is room for more than just one flag."
- The bank, in a 108-page March report, wrote it thinks Bitcoin is at a "tipping point of mainstream acceptance or a speculative implosion." However, "developments in the near term are likely to prove decisive" and the digital asset could one day "become the currency of choice for international trade."
Dive Insight:
If Citi enters the crypto fray, it would join the likes of BNY Mellon, Goldman Sachs, JPMorgan Chase and State Street in exploring the benefits of the space.
The revelation that JPMorgan would extend banking services to crypto exchanges Coinbase and Gemini came a year ago this week. The development appeared to represent a 180-degree turnabout from CEO Jamie Dimon’s 2017 assertion that Bitcoin was "a fraud" and that he would fire "in a second" anyone at his bank found to be trading in that currency.
That was also the year that Bitcoin’s value surged to nearly $20,000 before crashing. However, the asset’s price climbed again once the coronavirus pandemic took hold. Tuchman’s August benchmark is no accident — Bitcoin crossed the $10,000 threshold in late July 2020, according to Yahoo Finance. It has more than quintupled in value since.
Citi is approaching crypto with caution, Tuchman told the Financial Times. "We shouldn’t do anything that’s not safe and sound," he said. "We will jump in when we are confident that we can build something that benefits clients and that regulators can support."
The bank is under intense scrutiny from regulators. The Office of the Comptroller of the Currency (OCC) fined it $400 million in October over persistent issues in risk management, data governance and internal controls. New CEO Jane Fraser is also evaluating Citi’s business footprint and cutting ventures that are less profitable. The bank announced last month it would exit 13 retail markets abroad but doubled down on wealth management in Asia.
With crypto, Tuchman said, the bank is watching the long game. "I don’t have any FOMO [fear of missing out] because I believe that crypto is here to stay and that we are just at the very beginning of the market," he told the Financial Times.
A flurry of big banks have clamored to offer crypto services to clients so far this year. BNY Mellon in February said it is developing a client-facing prototype for a multi-asset digital custody and administration platform. Goldman Sachs in March said it would relaunch its crypto trading desk. (That, too, marked a shift from 2020, when the bank called digital assets "unsuitable" investments for clients.)
Morgan Stanley, also in March, told its financial advisers it is letting its wealth-management clients access three investment funds that enable ownership of Bitcoin.
And a London-based infrastructure provider said in April it was using State Street’s trading technology to create a cryptocurrency trading platform expected to go live in mid-2021.
