[2019-09-10] Citigroup works on new Bitcoin trading product

[veleten]

Citigroup has started working on a new Bitcoin trading product to the market, aiming to be ahead of its Tier I banking rivals around the world

The company is getting legally ‘creative’ in order to offer customers a tradeable, physical Bitcoin asset, known as a ‘digital’ American Depository Receipt (ADR), which functions as a foreign security product.

read more:
https://www.thepaypers.com/cryptocurrencies-bitcoin-virtual-currencies/citigroup-works-on-new-bitcoin-trading-product/774767-39

[squatter]

Here's a better source for the story: https://www.bloomberg.com/news/articles/2018-09-10/citigroup-is-said-to-plan-crypto-trading-by-issuing-receipts

I had never heard of these "digital asset receipts" or "American depositary receipts" before. It looks like they're structured sort of like physically backed ETFs: The commodity (BTC) is held by a custodian and receipts (shares) are issued by the bank based on that, which are then traded to brokers and sold to investors on the retail market.

It's a different angle than the ETF route, but as the article points out:

It’s unclear how U.S. regulators would view DARs. The Securities and Exchange Commission has taken a cautious approach toward virtual currency-linked securities, shooting down several proposals for crypto-themed exchange-traded funds. On Sunday, the SEC temporarily suspended trading in two crypto-linked exchange-traded notes, citing investor confusion regarding the assets.

[timerland]

Are these assets actually backed by bitcoin, or are they just pegged by Citibank to bitcoin's value or an index of cryptos?

These are questions that haven't yet been covered in the article, it seems. For now, it would seem to me that it's just another bitcoin derivative type of stuff that is aimed at speculating on the bitcoin markets. I would not get too excited about this news given that the best route to invest in bitcoin is still buying actual bitcoins instead of investing through a bank.

But it would be interesting to see whether this could actually go around existing regulatory concerns, if yes, then perhaps the ETF doesn't matter as much as people think at all.

[squatter]

Are these assets actually backed by bitcoin, or are they just pegged by Citibank to bitcoin's value or an index of cryptos?

They're physically backed by bitcoins. Bitcoin is held by a custodian, and then receipts are issued by Citigroup against the BTC held in custody. The receipts are then sold to investors. In a lot of ways, these receipts are similar to physically backed ETF shares.

For now, it would seem to me that it's just another bitcoin derivative type of stuff that is aimed at speculating on the bitcoin markets. I would not get too excited about this news given that the best route to invest in bitcoin is still buying actual bitcoins instead of investing through a bank.

But it would be interesting to see whether this could actually go around existing regulatory concerns, if yes, then perhaps the ETF doesn't matter as much as people think at all.

They can't go around existing regulatory concerns. These receipts are negotiable securities. This scheme requires a rubber stamp from the SEC just like an ETF does.

[Daltonik]

A little update: Coindesk, citing some knowledgeable sources, reported that Citigroup is waiting for regulatory approval to start trading bitcoin futures on the Chicago Mercantile Exchange(CME). https://www.coindesk.com/citigroup-is-gearing-up-to-trade-cme-bitcoin-futures-sources