Citigroup has come up with a new, less risky way of investing in cryptocurrencies without actually owning them. According to Business Insider sources, the New York-based bank’s new investment instrument is called Digital Asset Receipt (DAR) and would place cryptocurrencies within existing regulatory frames.
The structure provides Wall Street investors such as asset managers and hedge funds with a safer way of investing in the digital assets market, and can prove to be a game changer for cryptocurrency trading. DAR operates on the same principle as the American Depository Receipt (ADR) – a negotiable certificate that allows US investors to own a specified number of shares in foreign stocks not otherwise listed on US exchanges. The certificates are issued by the bank that holds the foreign stock.
Citigroup is one of the largest issuers of ADR in the world, having first issued the receipt in 1928. In the case of DAR, Citi will issue the certificate, which will be held by a custodian. Once a receipt has been issued, Citi will alert a Wall Street middleman that provides clearing and settlement services.
This project provides a layer of security for investors and legitimizes crypto trading as the receipt is based on a system most investors are already familiar with. According to Business Insider, DAR has been developed by Citigroup’s markets origination and depository receipts services teams.
Although some traditional financial institutions have expressed interest in blockchain and crypto technology, Bitcoin and other cryptocurrencies have remained largely ignored by Wall Street due to their anonymity, volatile prices, repeated breaches in security, and usage for criminal activities. Citi originally did not clear bitcoin futures trades for its clients, and has previously banned cryptocurrency-related purchases with bank-issued credit cards. However, according to a job ad posted on LinkedIn earlier this year, Citigroup has been looking for a vice president and a senior vice president for its anti-money laundering division. The ad listed “knowledge of cryptocurrency and bitcoin monitoring” and “Bitcoin Professional Certification” as requirements for the positions.
A spokeswoman for Citigroup declined to comment on the matter and did not confirm or deny Business Insider’s information.