Citigroup is broadening its digital asset services through two significant initiatives: a new partnership in the custody sector and the launch of a pilot program for tokenized deposits. The global investment bank has taken on the role of the first digital custodian for the BondbloX Bond Exchange, as announced on September 15. BBX, regulated by the Monetary Authority of Singapore, is acclaimed as the world’s inaugural fractional bond exchange, leveraging atomic settlement and distributed ledger technology, Citigroup said in a press release.
Through this partnership, eligible clients of Citi will gain access to BBX’s fractionalized bond trading, with the investment bank providing settlement and custodial services. Nadine Teychenne, Head of Digital Assets at Citi Securities Services, expressed, “This proprietary digital custody technology is scalable and will allow us to provide settlement and custody services for clients investing in assets issued on permissioned blockchain networks.”
BBX facilitates the trading of $1,000 fractions of conventional wholesale bonds, with these tokenized bonds residing on a distributed ledger, enabling nearly instantaneous exchange through atomic settlement. In contrast, traditional bond trades typically take around 48 hours to settle. Atomic settlement leverages blockchain innovations such as smart contracts for automated clearing and settlement, along with digital signatures using public or private keys.
Citigroup initially became the custodian for the traditionally issued bonds underlying BondbloX in 2021. This recent development expands Citigroup’s custody to encompass fractional, tokenized versions of these underlying bonds. According to the press release, Citigroup’s expanded role opens up these products to a broader base of institutional investors. The enhanced partnership also grants BondbloX users greater access to the global bond market, allowing for a more diversified digital asset portfolio.