After the halcyon days of late 2017, cryptocurrency enthusiasts are still looking for some ‘oomph’ that might push up the price of Bitcoin. That may come in the form of a new product launched by the banking powerhouse, Citigroup.
A report released by Business Insider this Monday indicates that the firm is developing a Digital Asset Receipt (DAR). This will act much like an old-fashioned American Depository Receipt (ADR).
Launched just before the Wall Street Crash, ADRs effectively streamline the process by which US citizens invest in foreign stocks. Rather than muddling through the bureaucracy and currency exchange needed to invest directly in a foreign stock, investors pay for a certificate issued by a US financial institution.
That institution will then hold the underlying security, represented by the certificate, in an overseas branch. Meanwhile, any realised gains or dividends will be paid out to the investor in the US.
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Citigroup – making the ADR of crypto?
Citigroup’s DAR will bear a great deal of resemblance to this. An investor will pay Citigroup for a DAR. Depository Trust & Clearing Corp will then act as custodian for the digital assets.
How exactly the next part will work is unclear. Bitcoin does not act like other equities. The price may change but there are no dividends to be gained from investing in it – at least in its current form.
How regulators will respond to Citigroup’s product is also up in the air. Earlier today, the Securities and Exchange Commission announced that it would prohibit US investors from trading in two cryptocurrency Exchange Traded Funds (ETFs).
That came just two months after the American regulator rejected an application by the Winkelvoss twins, two major Bitcoin investors, to launch a Bitcoin ETF. A decision regarding another application submitted by investment management firm VanEck has been delayed until the end of September.
A combination of regulatory pressure and mixed signals from firms themselves has left cryptocurrency traders unsure as to whether or not institutional investors are looking to enter the market.