The banks are about to get into crypto-related services.
Citigroup is one of the larger American banks. Over the last few years, it indicated that it was working on entering the digital asset space. This is something that is being echoed by many institutions.
Coinbase enjoyed an early mover advantage. The question I have for that company is whether it can withstand the storm that is about to hit. As the banks enter, the giants of finance start to flex their muscles. What does Coinbase do to counter it?
As an aside, Brian Armstrong showed himself to be an adept CEO. The company, in my view, has targeted different sectors to insulate itself from the competition. It will be interesting to see if they can erect some barriers that the Big Banks have trouble with.
We are going to see Citigroup, along with others, start penetrating the different crypto markets. These services they provide will roll out quickly. Ultimately, this will likely lead to enormous growth in total.
Perhaps that is Coinbase's greatest moat.
Citigroup About To Change Crypto
Citigroup seems to be taking the lead. There might be other banks who are further with their development but Citi is announcing where it stands.
Citigroup (C) is reportedly planning to begin offering crypto custody services in 2026, following nearly three years of work on the initiative.
Citigroup plans to launch a crypto custody service in 2026, as it seeks to deepen its presence in the digital asset market, according to a Monday report from CNBC.
To me, this is a direct shot at Coinbase. So far, that company has dominated the crypto custody services industry. It is the largest holder of crypto, servicing firms such as Blackrock.
Of course, here is where I can make a case where the larger pond benefits all.
Whatever the amount (in USD) that is under custody, this number is likely to explode. If we are looking at $500 billion (making up a number), that could easily grow to $5 trillion over the next 5 years. When the banks get involved, things move quickly.
Part of this expansion could be due to more tokens being placed under custody. This would be more BTC or ETH along with the addition of new tokens. For example, the approval of a BNB or SOL ETF would necessitate custodial services.
Another part of the equation is the increase in price of the assets. If BTC doubles, then the coins under custody doubles (in USD terms). This makes the entire pie larger since most of Wall Street fees rely upon a percentage structure.
There there are the services to its customers.
Chatterjee added that Citi is exploring both in-house technology and potential third-party partnerships for the custody platform, which will allow the bank to hold native cryptocurrencies directly.
"We may have certain solutions that are completely designed and built in-house that are targeted towards certain assets and certain segment of our clients, whereas we may use a [...] third party, lightweight, nimble solution for other kind of assets," said Chatterjee.
If the bank has native currencies it holds, there is nothing preventing the swapping from its own application. Here is where the idea of a CEX is negated since most banks could offer this service.
Do Not Overlook Stablecoins
We have been silent for the past month regarding stablecoins. The news was hot and heavy during the GENIUS Act drama as it moved through the Untied States Congress.
Once it was signed, things settled down a bit with the media.
That does not mean, however, things died off. Actually, the opposite is happening. According to Coingecko, the stablecoin market is now $311 billion. This is up from the $250 billion it was sitting at when the bill was enacted.
Citigroup was one bank that mentioned it was looking into this market. It is likely they bring out some kind of stablecoin. This was recently reaffirmed.
The bank has also deepened its involvement in stablecoins, with Chatterjee expressing that stablecoins could be useful in regions with limited banking infrastructure. He added that as Citi's clients grow in those markets, a stablecoin solution could help facilitate cross-border payments.
The banks are very interesting in cross-border payments since the existing infrastructure is flawed. Basically, we are looking at slow and outdated technology.
Blockchain fixes this. We can see how public blockchains operate in a fraction of the time. They also carry a reduced cost. The banks are aware of this and can piggyback on these networks.
I would not be surprised to see a CITI coin announced. This only makes sense as all major banks will want to participate. The advantages simply are too powerful to ignore.
This is the first major announcement by one of the leading US banks. It is not likely to be the last.