Trends

Citi Bank: 88% of financial institutions exploring digital assets and blockchain applications

Nov 17, 2022

Citi is the fourth largest custodian in the world, with approximately $25 trillion (trillions) in assets under custody. Its Securities Services Division, Ledger Insights reports, has announced that nearly 90% of financial institutions are using or actively studying use cases for digitized assets with blockchain or distributed ledger technology (DLT). 

According to Citi Securities Services, its new study shows that digital assets are seen as a significant business opportunity, while blockchain and DLT technology are perceived as a solution to a number of securities industry problems.

Among others, there is a trend to reduce normal settlement times from two days (T+2) to one (T+1). The U.S. Securities and Exchange Commission (SEC) has already initiated a plan to transition to T+1, and similar activities are underway in Canada and India, although the EU has yet to make a move in this regard.

While the majority of respondents currently favor improving existing infrastructure, many see blockchain as part of the reduction in settlement times, with 21% seeing it as critical. The ultimate goal is to achieve immediate settlement, also known as atomic settlement. Seventy-nine percent believe this will be achieved over the next decade.

Cost reduction is another strength of blockchain technology, with 54% of respondents convinced that blockchain technology will reduce post-trade costs by 10% to 30%. Some survey respondents believe that the revenue potential is far more attractive than the efficiency. In this regard, 92% perceive tokenization as a tool to improve liquidity and expand the number of tradable assets.


More than 300 institutions participated in the Citi study, including banks (47%), broker-dealers, asset managers, custodians, investors and infrastructure providers for financial markets. Seventy-three percent of these participants foresee the widespread use of digital currencies in trade settlement by 2026.

According to infrastructure providers, such currency will be a Central Bank Digital Currency (CBDC). However, Citi itself has recently contributed to the launched of the Regulated Liability Network (RLN) concept, which could serve to avoid the disintermediating effect of CBDCs on commercial banks. Still at an experimental stage, this concept involves connecting deposits at different banks via blockchain to facilitate instant settlement of transactions.

 

 

 

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