The US banking group Citigroup is developing a cryptocurrency custody investment solution based on a financial product aimed at institutional investors, which will allow them to enter the crypto market at low risks, according to an unidentified source, cited by the Business Insider.
The information, published on September 9th, indicates that the new product could be a “direct way to invest in cryptocurrencies without owning them,” the sources said.
The new instrument would be called the Digital Asset Receipt (DAR), a system inspired by the American Depositary Receipt (ADR), securities that have been traded on the US stock exchange since 1920. It is a system that allows investors to access shares of foreign companies, which are not traded on US markets.
According to the information, Citigroup, one of the largest issuers of ADRs in the world, would offer large Wall Street investors a structure for trading cryptocurrencies within existing regulations, with fewer risks and a system with which they are familiar.
Citigroup plans to launch a new cryptocurrency custody investment solution
The procedure developed by the Citigroup implies that the cryptocurrencies are in possession of a custodian. Citigroup issues the DAR and informs “Depository Trust & Clearing Corp,” a Wall Street intermediary offering clearing and settlement services, about the issuance of the receipt.
“That gives it an important layer of legitimacy and gives investors a way to track the investment,” the sources said.
Citigroup is not the first regulated financial institution to try to find mechanisms to attract investors interested in cryptocurrencies. At the beginning of August, Goldman Sachs disclosed their intentions to offer custody services for cryptocurrencies funds. However, about a week ago the US financial institution reported that it would postpone these plans, due to the lack of clarity that still exists in the regulatory framework for cryptos.
As regarding the Citigroup cryptocurrency custody solution, the US SEC’s reaction remains to be seen, as well as how the big Wall Street investors will react to this proposal.