Citigroup is making a significant strategic push in the digital asset space, with a clear focus on bringing traditional banking into the blockchain era. While exploring various technologies, the bank’s leadership sees a distinct advantage in solutions built on the foundation of the existing regulated financial system.
The Strategic Preference for Tokenized Deposits
Under CEO Jane Fraser, Citigroup has articulated a clear vision for the future of digital money. While the bank is actively exploring the issuance of its own stablecoin, Fraser has pointed out that there is currently an “overfocus on stablecoins” in the market. She positions tokenized deposits as the more seamless and efficient engine for the next generation of payments and financial infrastructure.
The core of this strategy lies in leveraging the inherent trust and regulatory clarity of the traditional banking system. Tokenized deposits are digital representations of commercial bank money; each token is a direct claim on a regulated bank and is backed by traditional fiat deposits. This means they operate within the well-understood framework of existing banking regulations, offering a familiar and secure option for corporate treasuries and institutional clients. Fraser emphasizes that this structure avoids the additional operational friction, including complex Anti-Money Laundering (AML) and compliance burdens, that can come with stablecoins.
Operational Advantages and Real-World Use Cases
The push for tokenized deposits is not just theoretical. Citigroup is building the infrastructure to make them a practical tool for its clients. The bank is already operating a 24/7 U.S. dollar clearing network that can link over 250 banks across more than 40 markets, enabling instant fund transfers to suppliers and third parties at any time.
This infrastructure unlocks powerful use cases that address longstanding inefficiencies in finance. For corporate treasurers and institutions, tokenized deposits can facilitate conditional payments, where funds are automatically released upon the fulfillment of a contract, and revolutionize cross-border payments by making them faster and significantly cheaper. They also enable more efficient securities settlement, allowing for the simultaneous exchange of assets and payment, which reduces counterparty risk.
A Coexistence Model with Stablecoins
Citigroup’s strategy is nuanced. While championing the potential of tokenized deposits for the future of institutional finance, the bank is not abandoning the stablecoin ecosystem. In fact, Fraser has confirmed that Citi continues to support stablecoins by providing essential services like on-and-off ramps, custodial services, and cash management for stablecoin providers.
The vision is one of coexistence, where different forms of digital money serve different needs. Tokenized deposits are seen as the backbone for a modernized, regulated financial market infrastructure. Meanwhile, stablecoins are expected to maintain a crucial role as a bridge for crypto market flows, facilitating entry and exit into the digital asset world. This balanced approach ensures that Citi can meet diverse client demands while navigating the evolving regulatory landscape.
