Citi has ruled out its plan for a cryptocurrency backed by a bank similar to a JPM currency

In light of the impact that JPMorgan recently made with its cryptocurrency plan backed by abank, it is worth remembering that another large institution tested a token to connect global payments for the first time in 2015.

Named”Citicoin”, the bank never formally announced the project outside Citigroup’s innovation lab in Dublin, not even as proof of concept. The idea was to rationalize the global payment processes. As such, there are obvious parallels with the much acclaimed JPM Coin.

However, after evaluating the experiment (not to mention the contempt of the bitcoin community at the time), Citi concluded that while technology has the potential to deliveron its promises, there were other, more effective and efficient ways to make improvements in the Payments.

That’s in line with Citi’s current head of innovation lab, Gulru Atak, global head of innovation for treasury and trade solutions (TTS). Regarding the cryptography experiments of her predecessors, she reported the following:

    “Based on the lessons learned from that experiment, we actually decided to make significant improvements to the existing rails by leveraging the payment ecosystem and within that ecosystem, we are also considering fintechs or regulators around the world, including SWIFT.”

Taking a measuredstep back, Atak said that when it comes to improving cross-border payments, the bank is looking for effective methods but with a shorter-term impact. “Weare trying to make those changes today, instead of just putting all our efforts into the technology of the future”. That is all in due time.

After all, to completely change a cross-border payment network with blockchain-enabled technology, one would have to address all the banks in the world, Atak said, adding:

    “If we are talking about cross border payments, how many banks do we have around the world and how many of them are already incorporated in SWIFT? And how long has it taken SWIFT to incorporate all those banks?

As such, Citi’s blockchain strategy in recent years has been to find ways to integrate legacy systems, Atak said, citing the bank’s 2017 partnership with Nasdaq, CitiConnect, designed to stream line payments around private securities. That project, he said, also has parallels with JPM Coin.

“CitiConnect did not issue stablecoins, but the infrastructure that was used was similar to the issuance of currencies on a blockchain platform”, Atak said. “But itwas only to integrate into a blockchain-enabled system at the end of our client and have it connect to our legacy payment processes in real time”.

From financing trade to FX

While Atak was pleased to reflect on previous blockchain initiatives, he also pointed out that Citi certainly continues to explore blockchain, especially in areas such as commercial financing.

This niche is a more realistic use case, he said, because building an ecosystem for commercial financing does not require as many banks as a full-fledged cross-border payment system. “Currently, our focus is more on commercial space and commercial finance and commercial letters of credit. We are experimenting with this technology, but we are probably a bit reserved when it comes to making bold public announcements”.

The rival global bank HSBC is not shy enough to hit its chest. In January, HSBC announced that it had settled $ 250 billion of foreign exchange (FX) transactions using a blockchain during the past year.

With respect to FX, Opeyemi Olomo, leader of blockchain of the Laboratory of Innovation of Citi, said that there are clear points of pain in that market, which has problems around the credit transparency. As with global payments, the question of whether to apply blockchain is reduced to the construction of an ecosystem and how expensive that process would be in relation to the benefit.

Olomo agreed that there is an opportunity.

He said: “Thereis a niche ecosystem and if you look at the liquidity providers in the FX space, the most important liquidity providers are not that many. “So that’s an ecosystem where you can may be think and have like five or sixtogether and you can start to make a difference”.

In general terms, Atak said that many industries are pushing to move existing instruments to ablockchain-enabled platform without necessarily thinking why that instrument exists from the beginning.

Instead, a detailed examination of the very nature of financial instruments may be required, he said. “For example, how did a human being come up with a banking instrument called a letter of credit? What were the problems that led to its creation?

This philosophical approach will guide Citi’s thinking, Atak added, concluding:

     “We are also challenging ourselves: are we looking for this technology at its best potential or are we just trying to get rid of the current friction and operational inefficiency in the system?


Disclaimer: This press release is for informational purposes information does not constitute investment advice or an offer to invest. The views expressed in this article are those of the author and do not necessarily represent the views of infocoin, and should not be attributed to, Infocoin.

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