Did Citigroup Just Solve the Crypto Investment Puzzle?

Did Citigroup Just Solve the Crypto Investment Puzzle?

Citigroup is reportedly developing a new investment product that could revolutionize the cryptocurrency space. In particular, the bank’s idea puts crypto investing solidly within already-existing regulatory frameworks. Even better, it taps into a familiar investment product to make it easier than ever to invest in crypto.

Citigroup’s New Idea

According to sources, Citigroup’s new investment product is called a “Digital Asset Receipt,” or DAR for short. The whole idea is to make it super easy for investors to buy into cryptocurrency without having to purchase and hold any actual coins.

So far, it’s unclear when the bank might launch the new product. But already, it’s making a huge buzz in the crypto universe.

In particular, it’s being hailed as a creative way to bring crypto investing into the mainstream. Here’s everything you need to know about Citigroup’s new DAR.

Digital Asset Receipt: The Basics

As currently being planned, Citigroup’s new DAR works basically the same way as an American Depositary Receipt (ADR).

ADRs have been around for decades. As a result, they are a proven investment tool. Similarly, ADRs are fairly mainstream and are familiar to many investors. Additionally, ADRs fit within all investing and financial regulations.

An ADR lets investors easily invest in foreign companies. In particular, companies not traded in the U.S. Basically, a U.S. bank purchases a bunch of foreign assets. From there, the bank sells investors an ADR.

This gives the investor an indirect way to tap into the foreign assets. While investors don’t actually own the underlying assets, they can still benefit from gains through the ADR.

All of this is important because Citigroup’s DAR is essentially a twist on the traditional ADR. Instead of owning foreign assets, Citigroup will own a group of cryptocurrencies. More specifically, the currencies will be held by a custodian and Citigroup will issue investors a receipt.

Just like a traditional ADR, investors will be able to buy shares in the underlying crypto holdings. In this way, investors can tap into the potential growth of the crypto market, but without having to personally own any currencies.

Potential Benefits of Citigroup’s DAR

There are two main benefits to Citigroup’s proposed Digital Asset Receipt:

1. Move Crypto Into Regulatory Frameworks

So far, regulatory agencies and banks haven’t quite figured out how to handle cryptocurrency. For example, the SEC continues denying proposals to launch a crypto exchange-traded fund.

To date, the agency continues to cite concerns over crypto’s security and longevity. And this is just one example of the financial world’s concerns. To put it simply, there’s a lot of uncertainty. And that has led to some confusion about how Wall Street might participate in the crypto universe. Importantly, a DAR would help normalize crypto investing.

That’s primarily because the whole idea piggybacks on the concept of an ADR, which is a completely mainstream method for investing. Citigroup’s new product would theoretically make it easy for everyone to invest in crypto because it would move such investments into the mainstream.

2. Familiarizes Crypto Investing

Similarly, a DAR would make it easy for investors. More specifically, it would make crypto investing as familiar and easy to navigate as any other type of investment.

From the perspective of many investors, crypto can be a bit frustrating. On the one hand, there’s so much activity and hype surrounding crypto. But on the other hand, it’s relatively confusing for newcomers. As a result, there are often barriers to entry for folks who would otherwise like to invest.

Citigroup’s DAR solves this. In particular, it takes the potentially confusing world of crypto investing and packages it in an investment product that’s been around since the 1920s. In this way, Citigroup’s DAR helps make the whole process much more familiar and accessible.