With all of the press hoopla surrounding JPMorgan and Jamie Dimon’s support of a “JPMCoin” project, analysts that follow the banking sector have been wondering where was the major competitor of JPMorgan, i.e., Citibank, positioning itself in the world of crypto innovation of the banking sector. Citibank has a reputation of being an innovator and first to market, but there has been very little news coming from this banking behemoth, as far as its experimentation with all things crypto. It turns out that Citi had been working on a “CitiCoin” type project since 2015, but tabled the project to pursue more effective ways, in its estimation, to improve its internal payment system approach.
Gulru Atak, one of Citi’s global heads of innovation, recently related in an interview that Citi had been pursuing an effort to use cryptos and the blockchain in a way of “making meaningful improvements in the existing rails”. The project was dubbed “CitiCoin”, and internally, “The digital asset, which was nothing more than a proof of concept created by Citi’s Dublin innovators, was once internally touted as a way to bolster global, digital-based payments.”
After much effort, however, the bank’s research and development team decided to curtail further work on the project, since it determined that there were better ways to “improve the existing [payment] rails.”
According to Atak: “[CitiConnect’s goal] was purely to integrate into a blockchain-enabled system on our client’s end and make it connect to our legacy payment processes real-time… Based on our learnings from that experiment, we actually decided to make meaningful improvements in the existing rails by leveraging the payments ecosystem, and within that ecosystem, we are considering the FinTechs as well or the regulators around the world as well, including SWIFT.”
JPMorgan has touted its efforts in the crypto world as a significant way to streamline internal processes that support its network of international correspondent banking relationships, which by their nature are materially different from the way that Citibank works with its international banking partners. Where blockchain and the use of a stable coin approach might work for JPMorgan, it was found to be counterproductive in the case of Citibank.
Once again Atak notes that the bank is reviewing other ways that might prove more effective in completing cross-border flows within its legacy system infrastructure. In her case, Citi might have to overhaul its entire system in order to accommodate a new approach with their existing client database: “If we are talking about cross-border payments, how many banks do we have across the world – and how many of them are already on-boarded on SWIFT? And how long has it taken SWIFT to onboard all those banks?”
International correspondent banking relationships have evolved and developed over decades into a hodge-podge of system integrations and individual security protocols. In some respects, it is amazing that capital flows work as effectively as they do today, but efforts to overhaul the current “patchwork quilt” of batch and online real time settlement systems into one coherent approach may take as many decades and more to effect a better way of doing business. Decentralized ledger system technologies may offer the possibility of a dramatic switch to something better, but progress will be “one step at a time” in this highly regulated ecosphere.
Atak did want to make it clear that Citi is by no means walking away from cryptos and blockchain technologies:
Our focus is currently more in the trade space and trade finance and trade letters of credit. We are experimenting with this technology, but probably we are a little bit, like, reserved when it comes to making bold public announcements.
The good news for crypto enthusiasts is that major banking interests continue to embrace all thing crypto in their seemingly embryonic phase, when experimentation can always reveal more avenues for applications than were first contemplated. The road forward will definitely be interesting, when major competitors find ways to leverage these new technologies for not only profit, but also for gains in market share.