- The Citi Token Services uses blockchain and smart contract technology to reduce cross-border payments from days to instantaneous.
- Citigroup’s pilot program on digitizing payments via blockchain was tested in collaboration with Maersk and Canal Authority.
In a bid to update its siloed financial system to a modern digital platform, banking behemoth Citigroup Inc. (NYSE: NYSE) announced the creation and piloting of a new program dubbed Citi Token Services. According to the announcement, Citi Token Services is geared towards helping institutional clients access an upgraded cash management system through the use of blockchain technology and smart contracts.
Furthermore, there is a dire need for a reliable, fast, and affordable cross-border payment solution in a bid to help enterprises around the world deliver to customers seamlessly.
Currently, it takes Citigroup’s international payments up to five days to complete a single transaction which comes at a huge cost to the customers. Through asset tokenization on a private blockchain, which does not require customers to run an individual node, Citigroup promises to deliver instantaneous payments throughout the week at scale. Notably, Citigroup intends to scale its digital payment platform through a regulated network to ensure sustainable growth. Shahmir Khaliq, Global Head of Services, noted:
Digital asset technologies have the potential to upgrade the regulated financial system by applying new technologies to existing legal instruments and well-established regulatory frameworks. The development of Citi Token Services is part of our journey to deliver real-time, always-on, next-generation transaction banking services to our institutional clients. This development goes hand-in-hand with our industry-leading work on the Regulated Liability to create interoperable digital asset solutions on a multi-bank basis.
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What the Citi Token Services Mean for Existing Stablecoins Market
As a veteran banking institution with legal operations in over 90 countries, Citigroup is likely to disrupt the traditional stablecoins market to a significant degree. Moreover, Citi has over the years since its inception gathered valuable working partners. For instance, Citi worked closely with Maersk and Canal Authority to oversee the launch of the piloting program on system digitization. Notably, the company tokenization program is almost similar to Ripple’s On-Demand Liquidity product that leverages XRP to free up funds held in nostro and vostro accounts. Ryan Rugg, Global Head of Digital Assets at Citi Treasury and Trade Solutions, noted:
Citi Token Services provides corporate treasurers with a new tool to manage global liquidity on a just-in-time, programmable basis. Frictions related to cut-off times and gaps in the service window will be reduced. Our solutions within the Citi network are complemented by inclusive and open industry collaboration on initiatives like the Regulated Liability Network.
The dramatic entry of Citigroup into the tokenization industry to solve its cross-border payment problems is expected to disrupt traditional stablecoins like Tether USDT, Circle’s USDC, and TrueUSD. Nonetheless, the traditional stablecoins are mostly used by DeFi protocols and hence still have future growth prospects amid mainstream blockchain and digital assets adoption.
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