Citigroup is planning to create a safer way to invest in cryptocurrencies like Bitcoin by developing a new system that allows people to trade in them without actually owning the underlying digital assets.
The US bank plans to act as an agent issuing so-called Digital Asset Receipts (DARs), or DARs, to enable trading by proxy. If approved by regulators, the new system would fall within existing institutional frameworks, helping shore up confidence in the coins as a legitimate investment class, according to those familiar with the matter.
DARs would work in a similar way to American Depository Receipts (ADRs), which are certificates that represent shares of a foreign stock issued by a bank.
The bank has reportedly developed a “Digital Asset Receipt”. It would allow crypto assets like Bitcoin, Ether and Litecoin to be represented via these certificates, thus allowing institutional investors to trade crypto assets more safely.
The structure could allow them to fall within existing regulatory regimes, giving more confidence to investors.
The volatility of the digital currencies, which are traded online, has raised doubts for traditional finance players around the future and safety of the assets.
Cryptocurrencies have been falling sharply in value recently. They have declined for five of the past six weeks amid signs that widespread adoption of digital assets is set to take longer than anticipated