Institutional investors will soon have a low-risk method of investing in cryptocurrencies thanks to the $175 billion banking group of New York, Citigroup. The finance giant will enable the purchase of cryptocurrencies with the help of insured and regulated custody solutions.
According to a report published by Business Insider, Citigroup has developed a product known as Digital Asset Receipt (DAR) with the help of the banking group’s two internal teams. This product will reduce the financial risks that come as a package when one deals with cryptocurrencies.
Digital Asset Receipt will be issued by the Citigroup and the crypto assets will be held by a custodian. Once the receipt has been issued, Wall Street’s Depository Trust & Clearing Corp will be informed. This, in turn, will add an element of legitimacy to the asset and provide investors with a familiar way of tracking their cryptocurrency based investment.
How Does Digital Asset Receipt work?
Digital Asset Receipt (DAR) is the crypto-form of American Depository Receipt (ADR). ADR works in such a manner that investors living in the United States are able to own foreign stocks that are not available for trade on the domestic exchanges. In ADR’s case, banks are the custodians of the foreign assets and depository receipts are issued to the investors. Citigroup is one the biggest global level issuers of ADR.
The launch date or any other related information regarding this product has not been disclosed. The reaction of the regulators is also not clear about DAR due to the recent ETF rejections by Securities and Exchange Commission.
If we dissect the concept of a DAR then we can see how it is quite similar to ETFs. In exchange-traded funds (ETFs), the represented asset does not require actual ownership by the investor. The Citibank issued DARs will allow US-based investors to possess financial instruments with the value equivalent to that of the crypto assets owned by Citibank on the behalf of its customers. For example, in the case of Bitcoin, Citibank’s DARs with BTC value will have protection, monitoring, insurance and other required features that are imposed by US finance regulators.
Impact on the Current Market
With the emergence of crypto-based products such as Citigroup DARs, Goldman Sachs Custody, and Coinbase Custody, financial analysts are predicting improvement in the infrastructure and liquidity of the cryptocurrency market.
It has been predicted that once these custody solutions will be available in the market, a huge chunk of capital will be injected into the crypto market. The release of these products is to be expected in 2019.