Citibank has abandoned its plans to launch a crypto, dubbed CitiCoin, according to Gulru Atak, head of the bank’s innovation lab,per CoinDesk.
Citi’s announcement comes within a month of JPMorgan launching its own crypto solution, JPM Coin, amid great fanfare. Although CitiCoin was never formally announced, Atak’s predecessor Kenneth Moore said in a 2015 interviewwith International Business Times the bank had the crypto up and running in its labs.
Here’s why Citi is abandoning CitiCoin and what it means for the bank’s blockchain efforts:
- Citi was exploring crypto to streamline cross-border payments, but has decided to focus on improving existing infrastructure. Following its experiments with CitiCoin, the bank decided that a better payoff would be gained by making improvements to existing payment ecosystems like SWIFT, rather than starting fresh, according to Atak. This is likely due to the strength of existing networks: SWIFT, which has over 11,000 members, moves in excess of $200 billion per day, accounting for more than half of all high-value cross-border payments, for example. Citi is now focused on finding more ways to integrate and optimize legacy systems: One example cited by Atak is a partnershipbetween Citi and Nasdaq to deliver an blockchain-based payment solution that integrates with Nasdaq’s Linq platform.
- While Citi has scrapped its crypto ambition, it’s actively exploring blockchain initiatives in other areas. The firm is experimenting with blockchain in trade finance, for example; it believes the nascent technology has more potential for success in this area because it doesn’t require as many participants to build an ecosystem as cross-border payments would. Citi is continuing to experiment with blockchain in this space, but is not yet ready to announce anything substantial publicly, according to Atak. This suggests Citi could be falling behind some of its peers: Following a yearlong trial, HSBC is set to roll out its blockchain solution for forex trading to institutional clients, for instance.
Citi’s decision to pull the plug on its crypto project underlines industry-wide concerns about the thin rewards from blockchain efforts. Blockchain’s potential as a game-changer has seen financial institutions (FIs) invest heavily in the technology: In 2017 alone, the industry spent $1.7 billion on the nascent technology, per Greenwich Associates. Yet, while some participants have begun to make headway, such as HSBC and JPMorgan, CitiCoin is illustrative of the many other players that failed to move from testing to live implementation.
In part, this is likely because replacing entrenched systems like SWIFT would require participants to significantly overhaul their existing infrastructure and operations — a lift that is unlikely to pay off, in the short term at least, by adopting blockchain. For now, we’re likely to see other FIs adopt Citi’s strategy of focusing on deploying blockchain to solve very specific pain points — like trade finance — and working to improve other processes through alternative means.