At Citigroup, now you can invest in cryptocurrency without actually having to buy any. The bank is taking commonly associated risk out of the equation with Digital Asset Receipts (DARs). Their crypto-lite investment option uses the somewhat retro financial solution known as American Depositary Receipts (ADRs), originally used to represent securities of companies abroad. Now the ADR structure will be used to allow the bank’s customers to indirectly invest in digital currency.
How it works
The cryptocurrency will be held by a custodian and Citigroup will issue a DAR to the investor. When you own a DAR given to you by Citibank, you basically own a representation of the value of the cryptocurrency held by Citibank. Citibank holds the funds for its customers to taper risk, making it a regulated and centralized investment in a decentralized currency.
Waiting on Wall Street
With the recent Goldman Sachs rollback on their previously announced cryptocurrency trading desk, the news couldn’t have come at a better time for Bitcoin bag holders who have been patiently waiting for a light at the end of this bear market in the form of Wall Street interest. Many believe that price recovery is now dependent on bigger Wall Street financial institutions and the SEC ushering in a new era of digital currency through implementing adoptive practices and legislation similar to Citigroup’s recent announcement.
It is, however, just an announcement and can be withdrawn just as easily as it has been said. Citigroup wouldn’t be the first company, government entity, or bank to say they were planning a program related to cryptocurrency and then get cold feet. Citigroup has yet to provide any further information or give a timeframe for implementation, but the news alone is objectively good for the crypto market.
Citigroup’s announcement further confuses already mixed signals between Wall Street, the SEC, and investors. Just last month the SEC gave another red light, turning down Bitcoin’s ETF proposal. How will regulators respond to Citigroup’s plans when only just yesterday September 9, the SEC issued a temporary ban on crypto-related exchange trade notes (ETNs), which are not dissimilar conceptually speaking from DARs.
Reactions to this Citigroup announcement amongst officials and other financial institutions will be very telling. Citigroup’s plan could act as a canary in a coal mine and dictate how hot or cold regulatory groups are running.