With JP Morgan recently announcing a plan for a bank-backed cryptocurrency, many have begun to question whether this bold new play will bring success. However, as many look to the future to provide answers, few have looked into the past to see how similar projects have fared.
One such project was created in 2015 by Citigroup. Codenamed “Citicoin,” the project out of Citigroup’s innovation lab in Dublin was never formally announced by the bank, even as a proof of concept. The idea was to streamline global payment processes. As such, there are obvious parallels with the much-vaunted JPM Coin.
However, the minds behind the program ultimately came to the conclusion that while the technology has the potential to live up to its promises, there were other more effective ways of making improvements in payments.
Citi’s Innovation Lab Chief, Gulru Atak, came to this conclusion about the program: “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 as the regulators around the world, including SWIFT.”
Atak also said when it comes to improving cross-border payments, the bank is looking at effective methods but with a shorter-term impact. “We are trying to make those changes today, rather than just putting all our efforts into future technology,” she said.
Citi’s recent blockchain strategy has been to find ways to integrate legacy systems. This can be seen in the bank’s 2017 partnership with Nasdaq, CitiConnect, which was designed to streamline payments around private securities.
“CitiConnect didn’t issue stablecoins but the infrastructure that was used was similar to issuing coins on a blockchain platform,” Atak said. “But it 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.”
Atak also stated that Citigroup continues to explore blockchain, especially in the area of trade finance. “Our focus is currently more in the trade space and trade finance and trade letters of credit,” she said. “We are experimenting with this technology but probably we are a little bit, like, reserved when it comes to making bold public announcements.”
Broadly speaking, Atak said many industries are pushing hard to move existing instruments to a blockchain-enabled platform without necessarily thinking why that instrument exists from the very beginning. Instead, a close examination of the very nature of financial instruments might be required, she said. “For example, how did a human being come up with a banking instrument called a letter of credit? What were the issues that led to its creation?”
As no one can predict what the future holds for blockchain, it will be interesting to see what strategies the banking sector employs to stay ahead of the curve.