Citigroup Reportedly Planning Crypto ADRs

Siamak Masnavi

On Sunday (9 September 2018), Business Insider (BI) reported that, according to people familiar with the matter, Citigroup has come up with a new mechanism called "Digital Asset Receipt" (DAR) for investing in cryptocurrencies; a DAR behaves in a similar way to an American Depository Receipt (ADR), "a negotiable certificate issued by a U.S. bank representing a specified number of shares (or one share) in a foreign stock traded on a U.S. exchange." 

Apparently, the source told Business Insider that the bank is planning to "act as an agent issuing so-called digital asset receipts, or DARs, to enable trading by proxy without direct ownership of the underlying coins." Such a structure would hopefully satisfy the fiancial regulators in the U.S. and make it easier for Wall Street's institutional investors to get into crypto.

The idea is that "the cryptocurrency is held by a custodian and the DAR is issued by Citigroup." BI's sources said that Citigroup intended to notify the Depository Trust & Clearing Corporation (DTCC), which functions as a Central Securities Depository (CSD) in the U.S. BI was told that this "lends an important layer of legitimacy and gives investors a way to track the investment within a system that they're already familiar with."

ZeroHedge notes that it makes perfect sense for Citigroup to go with a "synthetic ADR" approach since the bank is one of the world's largest issuer of ADRs.

BI says that this project is "a collaboration between the bank's capital markets origination team and the depository receipts services team.

On 31 August 2018, TheStreet reported that Citi analyst Josh Levin had written in a note to clients that "investors should keep an open mind but treat more heated near-term crypto / blockchain predictions with a healthy skepticism." However, the same article also pointed out that, interesting enough, Citigroup has been showing a "huge interest" in crypto.

For example, on 3 November 2017, TheStreet wrote that, according to the XBT Provider, the UK brokerage platform of Citibank (Citigroup's consumer division) had started offering clients access to Ether Exchange Traded Notes (ETNs). 

It is worth noting that the news/rumor about Citigroup planning to offer DARs came on the same day that we got the announcement from the U.S. Securities and Exchange Commission (SEC), covered by CryptoGlobe, that it was ordering a temporary suspension of trading in XBT Provider's Bitcoin and Ether ETNs ("Bitcoin Tracker One" and "Ether Tracker One").

Featured Image Credit: "Citigroup Center, Chicago" by "Tony Webster" via Flickr.com; licensed under "CC BY 2.0"