Citi not Launching their Own Token
JP Morgan and Jamie Dimon have been the biggest haters of bitcoin. So isn’t it peculiar that they are planning to launch their own coin, despite the statement - “Bitcoin is a scam”? Well, not really. Getting an asset’s price low to be able to purchase at the right time is a great strategy. Market manipulation is illegal however crypto is a largely non-regulated area so they could get away with it nicely with no shame.
In light of the splash JPMorgan made recently with its plan for a bank-backed cryptocurrency, it’s worth remembering another big institution first tested a token to connect global payments – back in 2015.
Codenamed “ Citicoin ,” the project out of Citigroup’s innovation lab in Dublin was never formally announced by the bank, even as a proof of concept. The idea was to streamline global payment processes. As such, there are obvious parallels with the much-vaunted JPM Coin.
Do You Really Need a Coin for This?
However, having taken stock of the experiment (not to mention the scorn of the bitcoin community at that time ) Citi concluded that, while the technology has the potential to live up to its promises, there were other more effective and efficient ways of making improvements in payments.
That’s according to Citi’s current innovation lab chief, Gulru Atak, global head of innovation for treasury and trade solutions. Regarding the crypto experiments of her predecessors, she told CoinDesk:
Based on our learnings from that experiment we actually decided to make meaningful improvements in the existing rails by leveraging the payments ecosystem and within that ecosystem, we are considering the fintechs as well or the regulators around the world as well, including SWIFT.
From trade finance to FX
While Atak was happy to reflect on previous blockchain initiatives, she also pointed out that Citi certainly continues to explore blockchain, especially in areas like trade finance.
This niche is a more realistic use case, she said, because building an ecosystem for trade finance doesn’t require as many banks as a full-blown cross-border payments system. “Our focus is currently more in the trade space and trade finance and trade letters of credit. We are experimenting with this technology but probably we are a little bit, like, reserved when it comes to making bold public announcements.”
Rival global bank HSBC is not so shy about beating its chest. In January, HSBC announced it had settled $250 billion of foreign exchange (FX) trades using a blockchain over the past year.
Regarding FX, Opeyemi Olomo, blockchain lead from Citi’s Innovation Lab, said there are clear pain points in that market, which has issues around credit transparency. As with global payments, the question of whether to apply blockchain comes down to building an ecosystem and how onerous that process would be in relation to the benefit.
Olomo agreed there is an opportunity.
“There is a niche ecosystem and if you look at liquidity providers in the FX space, the major liquidity providers are not that many. So that’s an ecosystem where you could maybe think of it and have like five or six together and you can start actually creating a difference,” he said.
The custody question
Since Citi is one of the world’s large custodians of financial instruments, it’s natural to ask if the bank is looking at the opportunities to safeguard digital assets – an activity that has drawn interest recently from other incumbent institutions, such as
central securities depositories.
Atak indicated that it is, but was tight-lipped on the subject. “Not within our business, but the businesses we are responsible for; that is a function they are looking into,” was all she would say.
Broadly speaking, Atak said many industries are pushing hard to move existing instruments to a blockchain-enabled platform without necessarily thinking why that instrument exists from the very beginning.
Instead, a close examination of the very nature of financial instruments might be required, she said. “For example, how did a human being come up with a banking instrument called a letter of credit? What were the issues that led to its creation?”
This philosophical approach will guide Citi’s thinking, Atak added, concluding:
“I am challenging ourselves as well: are we looking to this technology to its best potential or are we just trying to get rid of the current friction and operational inefficiency in the system?