Citi’s Ambitious Expansion into Digital Assets
Citigroup is looking into a significant expansion within the digital asset sector, with plans that could position the $2.57 trillion banking behemoth at the forefront of stablecoin custody, crypto ETF infrastructure, and blockchain-enabled payments.
In an interview with Reuters, Biswarup Chatterjee, Citi’s global head of partnerships and innovation for its services division, stated that the bank aims to offer custody for the high-quality assets that support stablecoins.
With the recent enactment of the GENIUS Act, issuers are required to maintain secure assets, such as U.S. Treasuries or cash, to back their tokens, creating an opportunity for traditional custody banks to enter the space.
“Providing custody services for those high-quality assets backing stablecoins is the first option we are looking at,” Chatterjee remarked. Citi’s services division, encompassing treasury, cash management, and payments for large corporations, has been integral to the bank, even as it undergoes comprehensive restructuring.
The interest in this area coincides with the expansion of the stablecoin market from crypto trading to mainstream payments and settlements. According to McKinsey, approximately $250 billion in stablecoins have been issued, although their use remains largely confined to the crypto sector. Citi views the recent legislation as a pivotal moment.
Additionally, Citi is contemplating the issuance of its own stablecoin, a notion confirmed by CEO Jane Fraser in July during the bank’s second-quarter earnings call.
“We are looking at the issuance of a Citi stablecoin, but probably most importantly is the tokenized deposit space, where we’re very active,” Fraser explained to analysts at that time. She emphasized that the aim was to modernize infrastructure and provide “the benefits of advancements in stablecoin and digital assets to our clients in a safe and sound manner.”
Beyond Stablecoins: A Vision for Custody Services
Citi’s aspirations reach beyond stablecoins. The bank is investigating custody services for the crypto assets underlying exchange-traded funds. Since the SEC approved spot bitcoin ETFs last year, the largest, BlackRock’s iShares Bitcoin Trust, has achieved a market cap of about $90 billion.
“There needs to be custody of the equivalent amount of digital currency to support these ETFs,” Chatterjee pointed out. Currently, Coinbase leads the ETF custody sector, handling more than 80% of issuers.
On the payments side, Citi already facilitates “tokenized” U.S. dollar transfers via blockchain between accounts in New York, London, and Hong Kong, operating around the clock. The bank is now developing services that will enable clients to transfer stablecoins between accounts or convert them into dollars instantly for payments. Chatterjee noted that conversations with clients are ongoing to determine use cases.
Regulators, who were once hesitant about traditional banks entering the crypto realm, have adopted a more favorable stance under the current U.S. administration. Nonetheless, Citi must adhere to anti-money laundering regulations and international currency controls.
Chatterjee emphasized that custody operations must ensure that assets are used for legitimate purposes before acquisition and must be supported by strong cyber and operational security.
Fraser has framed Citi’s strategy as a response to clients’ needs and the broader trend toward always-on, instant settlement. “Digital assets are the next evolution in the broader digitization of payments, financing, and liquidity,” she stated. “Ultimately, what we care about is what our clients want and how do we meet that need.”
With $2.57 trillion in assets under custody, Citi’s foray into stablecoins and ETF crypto custody could redefine how traditional finance integrates with the digital asset landscape.
Concerns from Banking Trade Associations
Major U.S. banking trade groups are urging Congress to prevent stablecoin issuers’ affiliates from providing interest to token holders, raising concerns that this could siphon deposits from banks and restrict lending.
In a joint letter, the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum, and Independent Community Bankers of America pointed out that while the GENIUS Act’s current provisions bar issuers from offering yields, there is a loophole that permits exchanges and affiliated entities to do so.
They referenced Treasury estimates suggesting that interest-bearing stablecoins could lead to as much as $6.6 trillion in deposit outflows, heightening funding challenges for banks and money market funds.
The organizations emphasized that bank deposits are a crucial source of loans, whereas stablecoins are not structured for lending and lack comparable oversight. They voiced concerns that joint marketing efforts between issuers and exchanges could amplify withdrawals during times of stress, increasing borrowing costs for households and businesses.
They urged for the extension of the prohibition to all intermediaries involved in stablecoin transactions.
This appeal comes amid rapid sector expansion. CertiK reports that the stablecoin supply has surged from $204 billion to $252 billion as of early 2025, with USDT leading the way and USDC growing to $61 billion.
Additionally, PayPal’s PYUSD has doubled in value through a Solana integration and has launched a 3.7% yield program. Both Coinbase and PayPal continue to uphold their reward programs, contending that the ban pertains solely to issuers.
Ripple CEO Brad Garlinghouse anticipates that the market could swell to $2 trillion, spurred by institutional adoption and regulatory developments.
