Citigroup is taking a closer look at stablecoins and their potential role in modern banking. The bank is exploring whether it should offer custody for the reserves that back stablecoins and whether blockchain technology could improve payment services for its clients.
This follows recent changes in United States regulation, which now allow banks to issue stablecoins if they are fully backed by secure assets such as United States Treasuries or cash.
For Citigroup, this is not simply about joining a trend, but about deciding how to position itself in a financial system that is increasingly shaped by digital assets.
Stablecoin Custody and Payments: Citi’s Strategic Approach
The first area Citigroup is examining is custody for the reserves that make stablecoins reliable. Stablecoins that meet the new United States legal requirements must be backed by assets that carry little or no risk, such as government bonds or cash equivalents.
Holding and safeguarding those assets is a role that fits with Citi’s existing business, which already includes managing large sums for major companies.
By expanding into this area, Citi could provide an essential service for stablecoin issuers while reinforcing trust in the stability of these tokens.
Stablecoins today represent a market valued at around 250 billion dollars, according to McKinsey. However, most are used within cryptocurrency markets rather than for everyday payments or cross-border settlements.
Citi’s move suggests it sees potential for growth beyond the crypto sector. If stablecoins are used more widely for corporate transactions, trade settlements, and treasury operations, banks with established reputations could play a significant role in enabling this shift.
Citi has already demonstrated that it can use blockchain for practical banking purposes. Its system for tokenised dollar transfers operates continuously across New York, London, and Hong Kong, allowing faster movement of funds than traditional banking hours permit.
This experience could help the bank offer same-day settlements of stablecoins, conversions into dollars, and instant transfers between client accounts.
However, there is strong competition. Coinbase currently manages over 80 percent of crypto exchange-traded fund collateral, which shows how established some players are in this space.
For Citi to compete effectively, it will need to leverage its strengths in regulation, global reach, and corporate client services to win a share of this market.
Infrastructure Potential: The Role of Private Blockchain Systems
If Citi decides to move forward, the technology it chooses will be critical. Large banks need systems that allow them to manage digital assets securely, comply with regulations, and integrate with existing financial services.
One option that could meet these needs is a private blockchain system designed for institutions, such as ZKsync’s Prividium.
Prividium provides a way for organisations to operate their blockchain within their own infrastructure or private cloud. This means Citi could control all data, determine who has access, and ensure that transactions remain confidential.
At the same time, the system can anchor transactions to Ethereum using zero-knowledge proofs, which confirm that they are valid without revealing private information.
Regulatory compliance is built into the design. Features include on-chain identity, know-your-customer checks, audit trails, and permission settings for different roles within the organisation.
This is particularly important for stablecoins, since new rules require issuers and custodians to demonstrate that all assets are fully backed and free from illegal activity.
In payments, a system like Prividium could allow Citi to offer real-time cross-border settlements without the need for pre-funded accounts in multiple countries. Clients could send stablecoins directly between accounts, and these could be converted to dollars almost immediately.
This would reduce the time and cost involved in moving money internationally and could make Citi more competitive in global transaction services. Custody of cryptocurrency exchange-traded fund collateral could also benefit from such a system.
For example, if Citi were holding the digital assets backing a Bitcoin ETF, it could use a private blockchain to manage the assets securely while providing regulators with the visibility they require.
The ability to share only the necessary information while keeping other details private is valuable in an industry where both transparency and security are essential.
The main advantage for Citi in adopting this kind of infrastructure is that it could offer these new services within its existing client relationships.
Corporations that already rely on Citi for treasury management could access blockchain-based settlements and custody without having to work with a separate provider, making adoption more straightforward.
Conclusion
Citigroup’s interest in stablecoin custody and blockchain payments reflects a broader movement among large banks towards integrating digital assets into traditional finance.
The new United States regulatory framework enables these institutions to take a more active role in stablecoins, ensuring that the assets involved are secure and compliant.
Competition from established crypto firms will be strong, but Citi’s established reputation, regulatory experience, and global network give it important advantages.
If paired with a secure, private blockchain system like Prividium, Citi could help create a bridge between regulated banking and the growing digital asset economy.