Citigroup Develops A Low-Risk Crypto Product For Investors

Citigroup Develops A Low-Risk Crypto Product For Investors

A new way has been availed where investors will be able to purchase cryptocurrency without owning them.

A New Way To Track Crypto Investments

It has been reported that Citigroup, the banking giant based in Manhattan New York, has come up with a product which is aimed at reducing the risks that asset management funds and hedge funds might run into when investing in crypto tokens.

The newly developed product was dubbed the Digital Asset Receipt. Going by the report which was made by the Business Insider, this product was developed through the joint efforts of both the depository receipts services and the capital markets origination teams within Citigroup.

While the banking giant will be the issuer of the Digital Asset Receipt, the crypto assets will be held by a custodian. Once Citigroup issues the receipt, Depository Trust & Clearing Corp (the clearing and settlement services company found on Wall Street) will be notified. Through this, the financial giant is aiming at assuring investors of the legitimacy of their crypto token of choice as well as availing a new more familiar way which investors can use to track their crypto investment.

Similar To The American Depository Receipt

Digital Asset Receipts function in the same way as the ADR (American Depository Receipt). The ADR enables American citizens or investors who are in the United States to hold foreign stocks which are not found in domestic stock exchanges. The ADR allows for the investment in foreign stocks by United States citizens and residents, with a bank acting as a custodian while the investor is given a depository receipt. Citigroup currently stands as among the largest issuers of ADRs having started the practice more than eight decades ago.

As to when the newly developed product will be launched and made available by the financial giant, this information is yet to be made public. It is also yet to be seen how regulators will view this product considering that it is coming at a time when the SEC (Securities and Exchange Commission) has been rejecting all attempts at launching a Bitcoin ETF (Exchange-Traded Fund).

More Bitcoin ETF Applications

The SEC has been rejecting all attempts made by several entities at securing a Bitcoin ETF. Some of the ETF applications that have so far been turned down include those made by GraniteShares, ProShares, and Direxion. Direxion and ProShares had made several proposals i.e. five and two respectively all of which were rejected by the SEC. in its explanation as to why it rejected all proposals, the SEC stated that the applicants were not able to show that they had implemented ample security measures which would prevent any malpractices from taking place.

The SEC had also rejected a second application for an ETF made by Cameron Winklevoss and his twin brother Tyler Winklevoss. Even though the Securities and Exchange Commission continues to reject all applications made with respect to Bitcoin ETFs, more and more applications continue to be made. Another application has been made by VanEck SolidX Bitcoin Trust, a proposal which the SEC will decide on by the end of September.

September 11, 2018

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Samantha Mitchell