Financial institution Citigroup investigates storage solutions for stablecoins and potential exchange-traded funds (ETFs) based on cryptocurrency assets.

In 2025, traditional banks, including Citigroup, are navigating a new landscape as they offer stablecoin custody and Crypto Exchange-Traded Fund (ETF) services. This transition presents both challenges and opportunities for these financial institutions.

Challenges

One of the primary hurdles banks face is the regulatory and compliance complexity. Banks must comply with evolving frameworks such as the U.S. GENIUS Act and the EU MiCA regulation, which impose stringent reserve requirements, audit mandates, reporting obligations, and anti-money laundering (AML) compliance. To manage custody of stablecoins, banks need to upgrade risk management and compliance infrastructure, as these digital assets move trillions in settlement value without traditional prudential guardrails [1][2][3].

Another challenge comes from competition from crypto-native firms. Established crypto firms already have advanced custody infrastructure and dominate retail crypto custody and wallets. Banks focus on business-to-business (B2B) services, where regulatory clarity and economic incentives are stronger, but competition remains fierce [1].

Operational readiness and integration also pose challenges. Banks need to invest in technology to integrate blockchain-based assets with legacy payment systems like wire transfers and ACH. This requires strategic planning, coordination across management, and potential system overhauls [3].

Stablecoins exhibit risks such as price peg fragility, potential to undermine monetary sovereignty, and cross-border redemption risks. These factors pose operational and reputational risks for banks managing custody or offering associated financial products [4][5].

Opportunities

Despite these challenges, there are several opportunities for banks. Custody services may not generate immediate revenue but serve as strategic positioning for future financial services dominance. Stablecoins are integral to emerging payment rails, cross-border settlements, and tokenized asset management [1][2].

New laws like the GENIUS Act accelerate institutional adoption by providing clearer frameworks. Banks have an opportunity to leverage FDIC support and become trusted custodians for stablecoin issuers, asset managers launching tokenized funds, and corporates using blockchain settlement [2][3].

Banks can develop crypto ETFs and tokenized funds that comply with regulatory standards, appealing to institutional investors seeking regulated exposure to digital assets. BlackRock's USD Institutional Digital Liquidity Fund exemplifies this trend, attracting billions in assets under management (AUM) [2].

Banks can collaborate with fintech and crypto firms for issuance, custody, and settlement, blending traditional financial trust with blockchain innovation. This can deepen client relationships and drive new revenue lines [3].

In summary, Citigroup and peers must carefully balance regulatory compliance, technological integration, and competitive dynamics to capitalize on the transition of stablecoins and crypto ETFs from speculative novelties to institutional-grade financial infrastructure poised to expand significantly by 2028 (with stablecoin issuance projected to reach $10 trillion) [2].

Citigroup is no longer on the sidelines, offering its experience in compliance, risk management, and global operations in the digital asset space. The bank hopes to offer a strong alternative to crypto-native custodians with its global scale and regulatory expertise. By offering secure, regulated custody and faster cross-border payment capabilities, traditional banks could fundamentally change how institutions interact with crypto markets and manage global treasury operations.

Citigroup is exploring partnerships with Payoneer for cross-border token services and Anchorage Digital for crypto treasury management. The GENIUS Act reclassifies stablecoins as non-securities and requires issuers to back them with high-quality reserves like U.S. Treasuries or cash, protecting assets and allowing tokenized payments to move on demand.

Stablecoin custody and Crypto ETFs are seen as a bridge between traditional finance and the growing digital asset ecosystem. Citigroup is reinforcing cybersecurity and operational checks in its stablecoin custody plan. The bank's stablecoin custody plan involves safeguarding the underlying reserve assets and aligning with existing treasury and payment platforms.

Cybersecurity is a major concern in stablecoin custody, requiring systems to prevent theft or fraud. Traditional banks, such as Citigroup, are looking to provide trusted, regulated options for the crypto market. Citigroup's aim is to offer institutional clients a banking-grade alternative for digital asset services.

Citigroup is preparing to support Bitcoin and Ethereum ETFs by providing secure, compliant custody infrastructure. U.S. and international regulations regarding stablecoin custody and Crypto ETFs are still evolving, potentially requiring banks to handle rules that vary from one place to another.

Citigroup is considering issuing its own stablecoin, creating a full-service model as both issuer and custodian. Citigroup's blockchain-based tokenized dollar network already links major financial hubs and aims to enable real-time cross-border transfers and on-demand conversion to fiat. The stablecoin market alone is estimated at $250 billion, while Bitcoin ETFs manage around $90 billion. Bitcoin ETFs managing roughly $90 billion show the demand for reliable institutional custody.

Integrating blockchain-based solutions with existing banking infrastructure is complicated. However, Citigroup is focusing on stablecoin custody and Crypto ETFs in the digital asset space.

To manage custody of stablecoins, banks need to upgrade risk management and compliance infrastructure, as these digital assets move trillions in settlement value without traditional prudential guardrails.
New laws like the GENIUS Act accelerate institutional adoption by providing clearer frameworks, allowing banks to leverage FDIC support and become trusted custodians for stablecoin issuers.
Banks can collaborate with fintech and crypto firms for issuance, custody, and settlement, blending traditional financial trust with blockchain innovation to deepen client relationships and drive new revenue lines.
Cybersecurity is a major concern in stablecoin custody, requiring systems to prevent theft or fraud, and Citigroup is reinforcing cybersecurity and operational checks in its stablecoin custody plan.
Citigroup is considering issuing its own stablecoin, creating a full-service model as both issuer and custodian, and its blockchain-based tokenized dollar network already links major financial hubs for real-time cross-border transfers and on-demand conversion to fiat.
U.S. and international regulations regarding stablecoin custody and crypto ETFs are still evolving, potentially requiring banks to handle rules that vary from one place to another, as they navigate the transition of stablecoins and crypto ETFs from speculative novelties to institutional-grade financial infrastructure.

Financial institution Citigroup investigates storage solutions for stablecoins and potential exchange-traded funds (ETFs) based on cryptocurrency assets.