Citibank customers to get digital tokens for their deposits under Citi Token Services

• Citigroup Inc. is making a foray into digital assets, with a new digital token service based on the blockchain system.
• Banks will enable issuance of digital money representing customers’ own funds before settling through central bank reserves on distributed ledger.
• Clients will be able to transfer liquidity between Citi branches 24/7, straight from their accounts. No digital wallets required.

Citibank has announced a new product christened Citi Token Services under the Citi Treasury and Trade Solutions (TTS), as parts of its cash management and trade finance (TradeFi) innovation. The feature is blockchain-based, leveraging smart contract technologies to bring digital asset solutions for its institutional clients.

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Citibank to introduce Citi Token digital asset

Citigroup Inc. has unveiled a new feature, Citi Token Services, integrating tokenized deposits and smart contracts into the financial conglomerate’s global network of banks. The move is part of its developmental objective, “upgrading core cash management and TradeFi capabilities,” according to an official announcement.

Tailored for institutional clients, the product aims to deliver a financial service that is accessible 24/7, with customers set to enjoy cross-border payments, liquidity, and automated TradeFi solutions around the clock. It will turn customers’ deposits into digital tokens, available for instant transfer globally, with the company’s treasury and trade solutions division running the project.

Citing the conglomerate’s Global Head of Services Shamir Khaliq:

…this development goes hand-in-hand with our industry-leading work on the Regulated Liability Network to create interoperable digital asset solutions on a multi-bank basis.

The innovation introduces a new concept, though subject to debate, on whether permissioned blockchains will irreversibly change global finance.

Citibank tests a regulated liability network with the Fed

The innovative solution, which bears remarkable promise for the TradeFi sector, is part of a collaborative test pilot between Citigroup Inc., Maersk, and the Federal Reserve, to “digitize a solution that serves the same purpose as bank guarantees and letters of credit in the trade finance ecosystem.”

The network would enable Citigroup’s banking network to facilitate digital money issuance in place of funds belonging to the bank’s customers. The credit thus issued could be settled with central bank reserves on a distributed ledger later. Its success would therefore prove to the Federal Reserve (Fed) that digital currency could improve wholesale payments.

With the service accessible through Citibank’s existing system, members will not have to set up a digital wallet for the Citi Token as it will use their native accounts with the bank.

Fed turning its coat on digital assets

The involvement of the Fed as a canal authority has caught the eye of market experts, including Ripple Lawyer John E. Deaton, who critiqued the financial authority for hypocrisy – embracing the technology after fighting it vehemently.

Nevertheless, the adoption of Citi Tokens for instant global transactions shows how traditional financial institutions are embracing digital assets to improve efficiency and customer experience.

It is worth mentioning that Citigroup was recently deliberating whether to maintain partnerships with Ripple’s Metaco, with which the bank had a digital custody deal running.

Ripple had acquired the Swiss finance technology firm for $250 million in May 2023, a year after Citigroup signed a collaboration with Metaco.