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Citi (C) Mulls Offering Bitcoin Futures to Affluent Clients

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Citigroup Inc. (C - Free Report) is penetrating the $2-trillion worth Bitcoin arena as it is considering to offer bitcoin futures trading for some institutional clients, on account of heightened demand in the cryptocurrency sector.

As per a Citigroup spokesperson, the bank is very discreet of its approach, given the number of issues around the regulatory framework, as well as the regulatory expectations in the cryptocurrency arena. Futures trading is on the table since these operate under a strong regulatory framework.

Coindesk reported that Citigroup was waiting for the regulatory approval to start trading bitcoin futures on the Chicago Mercantile Exchange, citing sources within the bank.

As per a Citigroup spokesperson, the bank is very discreet of its approach, given several issues around the regulatory framework as well as regulatory expectations in the cryptocurrency arena. The bank has put futures trading on the table since these operate under a strong regulatory framework.

Earlier this May, the bank was weighing the option of providing cryptocurrency-related services. It had been witnessing a “very rapid” build-up of interest in bitcoin across a wide spectrum of clients, including large asset managers. The bank was yet to finalize if or not it will offer clients cryptocurrency-related services, but trading, custody and financing were all under consideration, as stated by the firm’s global head of foreign exchange, Itay Tuchman.

Our Take

Until July 2020, the Office of the Comptroller of the Currency did not grant permission to banks to hold cryptocurrencies. The amendment post July gave banks the go-ahead to begin exploring cryptocurrency operations.
Thus, such an effort by the banking giant will likely further boost the world’s most popular cryptocurrency asset’s prospects, at least on the grounds that Citigroup is enabling cryptocurrency access to its clients.

The bank’s move follows its peer, Goldman Sachs (GS - Free Report) , which has launched trading with non-deliverable forwards, i.e. derivatives tied to Bitcoin’s price, which will be cash-settled. Additionally, the company will shield itself from the cryptocurrency’s fluctuations by trading Bitcoin futures in block trades on CME Group Inc., with Cumberland DRW as its trading partner.

Morgan Stanley (MS - Free Report) has also started offering clients access to three bitcoin funds as reported in March 2021. Earlier this February, The Bank of New York Mellon Corporation (BK - Free Report) became the first global custody bank to announce plans to form a new unit called Digital Assets to help its institutional clients hold, transfer and issue digital assets.

Shares of Citigroup have gained 9.4% in the past six months, underperforming the 13.9% growth recorded by its industry.

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