Citigroup is expanding its digital asset services with a new custodian partnership and pilot program for tokenized deposits.
The global investment bank has become the first digital custodian of the BondbloX Bond Exchange, it said in a press release on September 15. BBX is regulated by the Monetary Authority of Singapore and is described as the world’s first fractional bond exchange that uses atomic settlement and distributed ledger technology.
The partnership gives eligible Citi clients access to the fractional bond trading operations of BBX, the investment bank offering settlement and custody services.
“This proprietary digital custody technology is scalable and will allow us to provide settlement and custody services to clients investing in assets issued on permissioned blockchain networks,” said Nadine Teychenne, head of digital assets at Citi Securities Services.
BBX allows investors to trade fractions of $1,000 of traditional wholesale bonds. Tokenized bonds are maintained on a distributed ledger, allowing for almost instantaneous exchange via atomic settlement. Traditionally, it takes around 48 hours to settle bond transactions. However, atomic settlement uses innovations from the blockchain industry, such as smart contracts for automated clearing and settlement and digital signatures in the form of public or private keys.
Accessibility to the global bond market
Citigroup became the custodian of BondbloX’s traditionally issued underlying bonds in 2021. The latest development gives Citigroup custody of the split and tokenized versions of the underlying bonds. According to the press release, the fact that Citigroup has responsibility for the entire financial sector opens these products to a broader base of institutional investors. The strengthened partnership with Citi also gives BondbloX users greater access to the global bond market, allowing them to have a more diversified portfolio of digital assets.
“This partnership will allow Citi clients and others to enjoy almost immediately all the benefits of bond trading, coupled with the support of Citi’s securities services. Digital custody is the next big step in bond market transformation, making bond markets more transparent, electronic and accessible to everyone. Now, bonds are more easily accessible to everyone,” said Dr. Rahul Banerjee, Co-Founder, BondbloX.
The international investment bank added that the digital asset innovations it is pursuing include digital currency and bonds, digital custody, asset management and collateral mobility.
Tokenized deposits
Citigroup is also launching a pilot program to turn client deposits into digital tokens with an initiative that will use a private blockchain owned and managed by the investment bank.
The product, named Citi Token Services, transforms customer deposits into digital tokens, enabling instant global transfers, processed on blockchain-based payment rails, Bloomberg News reported Monday.
The pilot is part of Citi’s initiative to expand its digital asset offerings and meet the needs of its institutional clients, including providing a 24/7 cross-border payment service with high liquidity.
“The development of Citi Token Services is part of our journey to provide next-generation, real-time, always-on transaction banking services to our institutional clients,” said Shahmir Khaliq, global head of services at Citi.
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