Citi expands digital asset services with bond custody, tokenized deposits

Citigroup is expanding its digital asset services with a new custodian partnership and a pilot program for tokenized deposits. 

The global investment bank became the first digital custodian for the BondbloX Bond Exchange, it said in a statement on Sept. 15. BBX is regulated by the Monetary Authority of Singapore and is described as the world’s first fractional bond exchange that uses atomic settlement and distributed ledger technology.

The partnership gives Citi's eligible clients access to BBX's fractionalized bond trading, with the investment bank offering settlement and custodial services.

"This proprietary digital custody technology is scalable and will allow us to provide settlement and custody services for clients investing in assets issued on permissioned blockchain networks," Citi Securities Services Head of Digital Assets Nadine Teychenne said.

BBX allows investors to trade $1,000 fractions of traditional wholesale bonds. The tokenized bonds are held on a distributed ledger, enabling almost instantaneous exchange via atomic settlement. Traditionally, it takes around 48 hours to settle bond trades. However, atomic settlement uses innovations from the blockchain sector, such as smart contracts for automated clearing and settlement and digital signatures in the form of public or private keys.

Accessibility to the global bond market

Citigroup became the custodian for BondbloX's underlying traditionally issued bonds in 2021. The latest development gives Citigroup custody of the fractional, tokenized versions of the underlying bonds. According to the press release, Citigroup's custody of the full financial vertical opens up these products to a wider base of institutional investors. The enhanced partnership with Citi also gives BondbloX users greater access to the global bond market, enabling them to have a more diverse digital asset portfolio.

"This partnership will enable Citi’s clients and others to enjoy the full benefits of bond trading, coupled with Citi’s securities services support, almost immediately. Digital Custody is the next big step in the transformation of the bond market, making bond markets, more transparent, electronic, and accessible to all. Now, bonds are more easily accessible to everyone," BondbloX Co-Founder Dr. Rahul Banerjee said.

The international investment bank added that the digital asset innovations it is pursuing include digital money and bonds, digital custody, asset servicing, and collateral mobility.

Tokenized deposits

Citigroup is also debuting a pilot program for turning customer deposits into digital tokens with an initiative that will use a private blockchain owned and managed by the investment bank.

The product, named Citi Token Services, transforms customer deposits into digital tokens, enabling instantaneous global transfers, processed on blockchain-based payment rails, Bloomberg News reported on Monday. 

The pilot is a part of Citi's initiative to expand its digital asset offerings and address the needs of its institutional clients, including the provision of a 24/7 cross-border payment service with high liquidity.

"The development of Citi Token Services is part of our journey to deliver real-time, always-on, next generation transaction banking services to our institutional clients," Citi Global Head of Services Shahmir Khaliq said.