Citigroup, one of the world’s largest currency trading banks, is considering taking its first steps into cryptocurrency markets after a surge in interest from clients.
The group is the latest banking giant to consider pushing into the new markets according to Itay Tuchman, its global head of foreign exchange. Despite the reputational challenges, large dealers have been forced to respond to surging interest in bitcoin from asset managers and hedge funds.
Tuchman said the bank had not yet decided whether it would offer its clients cryptocurrency-related services, but he said that trading, custody and financing were all under consideration.
“There are different options from our perspective and we are considering where we can best service clients. This is not going to be a prop-trading effort,” Tuchman told the Financial Times, referring to proprietary trading in which banks trade on their own accounts.
In March, Citi issued a 108-page report noting that despite “a host of risks and obstacles that stand in the way of Bitcoin progress”, the cryptocurrency “may be optimally positioned to become the preferred currency for global trade”.
The price of bitcoin, the largest cryptocurrency by volume, has dropped 12 per cent from a record high set last month, but is still up 75 per cent since the start of the year, trading at $57,000 on Thursday.
Goldman Sachs, Bank of New York Mellon and State Street are among the large institutions that have recently announced plans to become active in different areas of the cryptocurrency market.
Tuchman said since August last year, Citi had seen a “very rapid” accumulation of interest in bitcoin across a broad spectrum of clients including large asset managers. Some had asked the bank for research, and others wanted to trade a range of coins through the bank and to finance deals with cryptocurrency holdings.
“We shouldn’t do anything that’s not safe and sound. We will jump in when we are confident that we can build something that benefits clients and that regulators can support,” he said.
Insiders at large crypto trading firms are privately sceptical that conventional banks would be able to compete against bitcoin specialists that have been active in the space for years.
Galaxy Digital, a New York-based firm run by Michael Novogratz, on Wednesday unveiled a $1.2bn deal to buy BitGo in a move it says is aimed at creating a “full-service platform for institutions seeking access to the crypto economy”. BitGo, which has $40bn in assets under custody, already offers services such as custody, portfolio management and prime lending.
Tuchman said Citi was in no rush to come to a decision on how deeply it should move into the crypto market.
“I don’t have any FOMO [fear of missing out] because I believe that crypto is here to stay and that we are just at the very beginning of the market,” he said. “This isn’t a space race. There is room for more than just one flag.”