One of the most significant issues facing investors in cryptocurrency is investing in cryptocurrency without losing significantly. Ever since the explosion of Bitcoin a few years ago, many people have gotten into the crypto world hoping to make some significant profit.
However, like any market, some lose their investment in the process of trading, and it has, thus far, been accepted as an inevitable aspect of the market.
Financial giant CitiBank is looking to solve this problem by offering low-risk cryptocurrency investment to its customers.
Citibank intends to reduce the risk is to create a way for its customers to invest in cryptocurrency without actually owning any. Called Digital Asset Receipt, the new service was created as a collaboration between the bank’s depository receipts services team and the capital markets origination team
CitiBank will issue the DAR while a third-party custodian will have ownership of the cryptocurrencies. This system allows the investors to have a certain level of security in the asset while still maintaining a level of control.
After issuance of the receipt, a clearing and settlement agency will be informed by CitiBank regarding the assets.
Not the First Time
The system that DAR uses is hardly a new one.
It is quite similar to the way American Depository Receipts work. In the case of ADR, United States investors are allowed to invest in foreign assets that are not available on the U.S stock exchange.
A bank, in this case, acts as a custodian while the investors I able to trade and is issued with a depository receipt.
CitiBank itself is hardly new to ADRs as they have dealt in then for almost a decade. Now, they intend to do the same with cryptocurrency, though an official launch date is yet to be announced.
One of the most significant setbacks facing new crypto investments is the recent rejection of some crypto exchange-traded funds (ETFs) by the Securities and Exchange Commission.
According to the commission, one of the primary reasons is that they did not believe that the exchanges were well-equipped to prevent fraudulent activities.
“Surveillance-sharing with a regulated market of significant size related to Bitcoin is necessary to satisfy the statutory requirement that the Exchange’s rules be designed to prevent fraudulent and manipulative acts and practices,” explained the SEC.