Crypto receipts!
This is the most perfect thing I have ever read about the blockchain:
Citi has developed an instrument it is calling a digital asset receipt. It works much like an American depositary receipt, which have been around for decades to give US investors a way to own foreign stocks that don’t otherwise trade on US exchanges. The foreign stock is held by a bank, which then issues the depositary receipt.
In this case, the cryptocurrency would be held by a custodian, with the so-called DAR issued by Citigroup, the people said. The bank would alert the Depository Trust & Clearing Corp., a Wall Street middleman that provides clearing and settlement services, that it issued a receipt, one of the people said. That lends an important layer of legitimacy and gives investors a way to track the investment within a system that they’re already familiar with, the person added.
I want to cry. I want to give those paragraphs a hug. I have written, more than once, about the complexities and inefficiencies of having pretty much all U.S. stocks held by DTCC. “It’s enough to make you wish for a blockchain,” I once wrote. A secure, open, permissionless, immutable record of who owns what, one that doesn’t require investors to trust either a bank or a central Wall Street intermediary or to rely on those intermediaries’ old-fashioned systems: That is a core dream of the blockchain, a central appeal of cryptocurrencies.
And then here is Citigroup Inc. looking at investor demand and concluding: Yes, sure, Bitcoin is great, but what Bitcoin investors really want is to hold Bitcoins in the form of receipts issued by a giant bank and registered at DTCC. That’s where the real innovation is! That’s what the people want! “Take this blockchain away from me,” they cry, “and give me the old system that I know!” A claim that you sometimes hear is that the blockchain will revolutionize back-office processes — settlement, custody, etc. — in the financial system. But look at the actual experience of cryptocurrency custody. The main story of institutional investment in cryptocurrency these days is a story of custody, broadly speaking:
Large institutional investors want to get access to Bitcoin, but they do not want to own actual Bitcoins, themselves, on the actual Bitcoin blockchain. They want Bitcoin exchange-traded funds, or Bitcoin futures, or Bitcoins held in custody by regulated crypto exchanges or traditional big banks, or, sure, crypto depository receipts, why not. Everywhere there is a blockchain, a trusted central intermediary — often a bank or other old-school Wall Street middleman! — springs up to make it useful. Does that tell you anything about the prospects for blockchains to replace central intermediaries? I confess, though, that it goes the other way too:
“Two financial technology companies won New York state approval to issue cryptocurrencies pegged to the U.S. dollar,” the Gemini dollar and the Paxos Standard, “creating more regulated and transparent competitors to Tether and other so-called stable coins,” which are in turn competitors to … the dollar. If you want to hold your Bitcoins through a bank, you can, but on the other hand
if you want to hold your dollars through a blockchain, you can do that too. https://www.bloomberg.com/view/articles/2018-09-10/keep-your-bitcoins-in-the-bank....
Summary: Citibank has created something they call a "digital asset receipt(DAR)" which could allow purchasers of bitcoin to have banks hold their coins. The details aren't clear. There isn't much information posted here about minimum purchasing amounts or who digital asset receipts will be marketed to. Its nice to see innovation and new offerings for crypto enthusiasts. Although I have a feeling these digital asset receipts might come bundled with $100,000 dollar minimum investments and cater only to high(er) end demographics.
I would guess some would opt for DAR's if they could provide insurance on bitcoins and crypto up to limited amounts.
