Citi prepares for tokenised future as stablecoins gain ground

Key Concepts:

• Stablecoins
• Tokenization
• Blockchain Technology
• Cross-border Payments
• AML/KYC (Anti-Money Laundering/Know Your Customer)
• Risk Management
• Interoperability
• Fiat Currency
• Central Bank Digital Currencies (CBDCs)
• Tokenized Cash Services
• 24/7 Dollar Clearing

Stablecoins and the US Dollar's Dominance

Shamir Khalik, Citi's Global Head of Services, discusses the potential impact of stablecoins on cross-border payments and the US dollar's dominance. Citi welcomes the new regulations being rolled out globally, including those in Hong Kong and Europe, as they provide clarity on roles, responsibilities, AML/KYC, and sanctions. Citi operates in 94 markets and connects to over 290 clearing systems, aiming to help clients manage their businesses efficiently.

Citi's Engagement in the Digital Asset Space

Citi is actively involved in the digital asset space, with its own Citi Token Services operational for almost 24 months. They also have a 24/7 dollar clearing platform and are the largest clearer of US dollars globally, including Euros and Sterling. Citi is working with counterparts to stay engaged in the evolving system, ensuring that risks are appropriately managed and housed in the right place.

Stablecoins and Trade Finance Opportunities

Khalik addresses the strategic opportunity stablecoins, particularly in China, could pose for Citi's trade finance business. Central banks worldwide are considering the impact of stablecoins and the tokenization of commercial bank money. Blockchain technology can facilitate seamless money movement, but proper regulation, risk governance, and oversight are crucial. Interoperability mechanisms are needed to ensure the connection between fiat currency, central bank money, and commercial bank money.

Client Interest and Engagement

Citi's clients are expressing interest in settlement in alternative digital currencies. These sophisticated counterparties seek tangible risk management processes and value addition before exploring these options. Clients in e-commerce marketplaces and the fintech space are looking to partner with Citi and other financial institutions to develop future platforms. Citi is actively engaged with clients and industry infrastructures to help develop these platforms.

Conclusion

Citi is actively monitoring and participating in the evolving landscape of stablecoins and blockchain technology. The bank emphasizes the importance of regulation, risk management, and interoperability in ensuring the responsible adoption of digital assets. Citi is working with regulators, clients, and industry partners to develop platforms for the future of money movement.