DIGITAL ASSET RECEIPT: PROMOTING AND LEGITIMISING CRYPTO TRADING
A recent report on CitiGroup’s plans has revealed that the multinational investment bank is working on the creation of a new financial instrument that has the potential to radically boost crypto-related transactions, both simplifying and helping in legitimising the trading of cryptocurrencies like Bitcoin with traditional investors.
The report points out that the financial product CitiGroup is working on, will be capable of operating within the current regulatory framework, bringing to Wall Street’s traditional market operators, such as asset managers and hedge fund investors, a less risky way to trade non-traditional assets.
The product CitiGroup is allegedly close to be to launched, according to the report, will be dubbed as “Digital Asset Receipt,” because it resembles the decades-old “American Depositary Receipt” (ADR), an instrument that assisted U.S. investors in owning foreign stocks that don’t trade on U.S. exchanges. In the case of ADRs, stocks are held by a bank, which is responsible for issuing a receipt.
In the case of the Digital Asset Receipt, according to the sources cited by the report, a custodian will hold the cryptocurrencies, with the Bank then alerting the Depository Trust & Clearing Corporation (DTCC), a Wall Street middleman company that provides clearance and settlement services. This procedure can potentially further the process of legitimising crypto assets and give the investors an established path to track their investments through a proven system.
It is not clear yet if and when the product will be released, but it comes as the latest of many different attempts made by banks and traditional financial institutions struggling to offer viable and safe solutions to trade crypto assets to their clients. Mostly, as noted by Bloomberg, because of “the difficulties of acting as custodians of digital assets, which are notoriously susceptible to theft from hackers. A number of firms in the crypto world and on Wall Street have been working on solutions for custody — while others have sought workarounds.”
CitiGroup alleged solution, seems to have been able to identify “three legs to make this type of trading work,” that is some “firms would buy Bitcoin and deposit it with a custodian of their choice. The bank would then issue receipts to those firms, who could trade the instruments with brokers. That would allow other investors to dabble in Bitcoin by buying and selling the receipts.”
Any operator involved in trading cryptos should be happy, including Elpis Investments, which is building the first AI-based hybrid quantitative trading platform to trade both traditional futures and crypto-assets, about the possibilities Digital Asset Receipt will open up to crypto trading, promoting and legitimising it with a larger investors base.
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Chief Editor of Elpis Investments, the first AI-driven Crypto and Traditional Assets Investment Company: www.elpisinvestments.com, email@example.com