Citi Targets 2026 for Institutional Crypto Custody Launch, Explores Stablecoins

Executive Summary

Citi announced its intention to launch institutional cryptocurrency custody services by 2026 and is actively developing stablecoin issuance capabilities, marking a substantial move by a major traditional financial institution into the digital asset space.

The Event in Detail

Citigroup is preparing to introduce a digital asset custody service for its institutional clients by 2026. This initiative follows over two years of internal development, positioning Citi to securely hold native digital currencies for entities such as asset managers. The bank's approach to custody involves a hybrid model, utilizing a combination of in-house developed technology solutions and strategic partnerships with smaller, third-party technology firms to manage custody risks across various asset classes.

Biswarup Chatterjee, Citi's global head of partnerships and innovation in the services business, indicated that the bank hopes to bring a credible custody solution to market within the next few quarters. He stated, "We may have certain solutions that are completely designed and built in-house that are targeted towards certain assets and certain segments of our clients, whereas we may use a… third-party, lightweight, nimble solution for other kinds of assets." This flexibility is intended to adapt to the evolving demands for digital assets among Citi's clientele. In parallel, Citi is exploring the issuance of its own stablecoin and advancing its Citi Token Services for 24/7 money transfers.

Financial Mechanics

Citi's entry into digital asset services extends beyond custody to encompass stablecoins and tokenized deposits. The bank views stablecoins as a tool for cross-border payments, particularly for clients in emerging markets, facilitating quick settlements. Citi Ventures, the bank's venture arm, recently invested in BVNK, a stablecoin payments startup, underscoring its commitment to scaling stablecoin infrastructure. This investment aligns with Citi's research projecting that the stablecoin market could reach a multi-trillion-dollar payments market in the coming years. BVNK currently processes over $20 billion annually for global enterprises.

Jane Fraser, Citigroup's CEO, identified tokenized deposits as a strong area of opportunity for the institution. Tokenized deposits offer similar benefits to stablecoins, such as speedy settlement and reduced fees, but operate within a regulated banking environment. These are digital representations of actual bank deposits, typically issued on private permissioned ledgers for institutional use cases like corporate treasuries and interbank settlement.

Business Strategy & Market Positioning

Citi's strategy reflects a broader trend among traditional financial institutions to integrate blockchain technology. By offering banking-grade infrastructure and compliance, Citi aims to challenge existing crypto-native custodians like Coinbase, which currently holds a significant share of the crypto exchange-traded fund (ETF) custody market. The move is partly spurred by a more permissive regulatory environment in the U.S., particularly following the passage of the GENIUS Act, which provides regulatory clarity for stablecoins.

Biswarup Chatterjee emphasized the criticality of secure digital asset custody to support the growth of crypto-linked investment products, especially after the U.S. Securities and Exchange Commission's approval of spot Bitcoin ETFs in 2024. This approval led to a surge in market capitalization for these products, with BlackRock's iShares Bitcoin Trust amassing approximately $90 billion.

Market Implications

Citi's planned launch of crypto custody services and its exploration of stablecoin issuance are poised to significantly accelerate the institutional adoption of digital assets. By providing regulated and secure custody solutions, Citi is likely to attract more traditional financial players, enhancing the overall market legitimacy and liquidity of the digital asset ecosystem. This strategic pivot indicates a growing convergence of conventional banking and the evolving crypto economy. The focus on stablecoins and tokenized deposits also points to a future where blockchain technology streamlines cross-border payments and treasury management for corporations, minimizing foreign exchange friction and optimizing liquidity.

Broader Context

The move by Citi is not an isolated event but rather part of a larger industry trend. Other major financial institutions, including JPMorgan Chase and Bank of America, are also deepening their involvement with stablecoins and digital assets. JPMorgan, for instance, is pursuing initiatives through its Kinexys digital assets division. Regulatory frameworks, such as the GENIUS Act in the U.S. and the Markets in Crypto-Assets (MiCA) regulation in the EU, are contributing to a clearer operating environment, though regulatory arbitrage remains a challenge as identified by the European Banking Authority. The increasing interest in tokenizing real-world assets, from property deeds to stocks and bonds, further illustrates the potential for blockchain to modernize and secure financial transactions. Citi's endeavors position it at the forefront of this transformation, aiming to bridge traditional finance with the more flexible, digital financial system of tomorrow.