It was only a matter of time before the big banks got involved in crypto.
The major name when it comes to Wall Street for crypto is Coinbase. So far, this has run unimpeded in the United States. While operating as an exchange, the firm offers a multitude of crypto services, including the custody of assets.
This is about to change.
With the passage of the stablecoin bill, along with other upcoming legislation, the banks are reading the tea leaves. One, Citigroup, is looking to dive into this in a big way.
Joining the stablecoin party is nothing special. It is likely that Citi, as will most other banks, will have its own token. This will tie into a payment system, something the institution is interested in.
What got my attention was the custody service. This is something that has fallen mostly to Coinbase. Because of this, it is at the epicenter of everything. Citigroup is potentially moving into that realm.
Wall Street giant Citigroup is weighing plans to offer cryptocurrency custody and payment services, aiming to capitalize on a market bolstered by Trump-era regulatory approvals and pro-industry legislation.
Not surprisingly, this would likely start with the assets backing the stablecoins.
Suddenly, we see a market get much bigger. This is more than just holding some Bitcoin. It is going after the potential trillions in US Treasuries and other assets that will be linked to the stablecoins.
Then we have this:
The bank is also exploring custody offerings for crypto-linked exchange-traded products, which could include Bitcoin (BTC) and Ether (ETH) exchange-traded funds (ETFs).
Blackrock has its Bitcoin ETF over $80 billion. Ethereum ETFs have seen massive inflows over the past couples months as that coin gains momentum, especially with treasury firms.
ETFs are swallowing up supply.
According to Bitbo, the 12 US spot Bitcoin ETF issuers now hold nearly 1.3 million BTC — about 6.2% of the total circulating supply.
Of course, to anyone who is involved in crypto and watching the industry, this is no surprise. The amount of interest since crypto ETFs were approved has skyrocketed.
What these banks are really gearing up for is the tokenization of RWA. To Wall Street, this is the "killer app". There are hundreds of trillions of dollars in play, something these firms want to take from.
Citigroup is well aware of this. It dove into the blockchain world back in 2023 by partnering with the SXI Digital Exchange.
Blackrock is one Wall Street firm that is doing a great deal of experimenting with RWA. So far, it uses Coinbase for custodial services, specifically for the Bitcoin and Ethereum purchased for the ETFs. Citigroup will offer another option.
When looking at Treasuries, MBS, and other assets that could not only be tokenized but also tied to other crypto-assets, we can start to see the potential. Some firms are going to dominate and getting a head start is helpful.
Of course, we cannot expect JPMorgan and Goldman to be idle. That said, it appears Jamie Dimon is still mystified by crypto as noted by his recent comments regarding stablecoins. He doesn't see the point although realizes there is a potential market, opting to enter the bank in the arena.
Dimon is one of the more intelligent men on Wall Street. This does show, however, when disruption can take even the "experts" by surprise. Some CEOs will see it and bring forth a vision, others will not.
My guess is RWA will explode over the next decade. At present, infrastructure is required, something Citi is likely setting up. Legislation is also needed as legacy securities laws simply are not applicable.
Through the middle of the 2030s, I expect we will have a "hybrid" system where TradFI and crypto merge. Wall Street will move much faster than the decentralized world. Nevertheless, DeFi is making strides and the traditional system is starting to tap into this.
Ultimately, this will bring the capital explosion which powers more development. Over time, decentralized and open source products catch up. The power eventually shifts yet the open source community is surpassed in the early stages.
I think this is what we will see here. The big banks can spin things up in months as compared to years. That is one of the advantages to centralizations. When an institutions like Citi decides it wants into something, it allocates the resources to get it done.
For the moment, it appears Citigroup wants into crypto in a big way.
