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Citigroup to Issue Digital Asset Receipts to Bring Cryptocurrencies to Institutional Investors

Citigroup to Issue Digital Asset Receipts to Bring Cryptocurrencies to Institutional Investors

Reading Time: 2 minutes by on September 11, 2018 Finance, Investment, News, Regulation
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Even though the ongoing slump seems to have scaffolded the crypto markets, financial giants continue to test their mettle in the cryptosphere. Per a report by Business Insider published on September 9, 2018, Citigroup Inc. is fidgeting with a fresh idea to securely invest in cryptocurrencies in the form of Digital Asset Receipts (DAR), a financial product not too different from a foreign security product.

Bringing Bitcoin to the Forefront

According to the report, Citigroup is formulating a new mechanism to bring the prime cryptocurrency out of the shadows. An insider with knowledge of the plans told Business Insider that the bank is aiming to issue DARs to foster crypto trading without actually owning the underlying digital assets.

The proposed trading mechanism will use a proxy model, where Citi will ensure safe crypto trading within the realm of the existing regulatory infrastructure without actually owning the crypto tokens.

DARs will function similarly to the American Depository Receipts (ADRs). An ADR is a negotiable certificate issued by a U.S. based bank denoting a certain number of shares (crypto tokens, in our case) in a foreign stock traded on an exchange based in the U.S.

The anonymous individual added, “We expect it would be a security structured so that custody, settlement, etc. would fit into existing systems and regimes versus an NDF which is an OTC derivative. Many investors are often more restricted in their use of derivatives versus purchasing securities.”

Official Nod of Approval Remains Unclear

It is common knowledge that government authorities and regulators still view cryptocurrencies with a degree of hesitation. Although commentators do not have ample knowledge about how U.S. regulators would perceive DARs, recent history is a testament to the SEC’s apprehension towards crypto tokens.

BTCManager reported on August 23, 2018, that the SEC rejected three more Bitcoin ETF applications after an exhaustive review spanning more than eight months. This move has been seen as a significant setback for crypto adoption en masse.

However, all is not lost as major institutional investors and firms around the world continue to come up with innovative and seamless solutions to invest in the cryptospace.

Reported by BTCManager on August 4, 2018, the Intercontinental Exchange has teamed up with some of the biggest names in the corporate world including Microsoft, Starbucks, and BCG to come up with an “open and regulated” crypto trading platform, dubbed “Bakkt.” The ambitious bitcoin venture is slated to commence its operations from November 2018.

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