In the age of cross-continent, real-time payments, Citi has made it a priority to stay ahead of the curve. The bank’s treasury and trade solutions customers were asking for multinational cash management and trade services available 24/7 and that’s where Citi Token Services was born.
“The pain point was our clients wanted 24/7, always on, liquidity and payments,” said Ryan Rugg, Citi’s global head of digital assets, treasury and trade solutions. “At Citi, we’re in 90-plus countries covering large multinationals, and that’s who we built this solution for.”
Ambrish Bansal, Citi’s global head of liquidity and cash concentration solutions, liquidity management services in the bank’s treasury and trade solutions unit, said the initiative stemmed from clients’ requests.
“It’s really important for us to ensure that our clients can leverage cutting-edge technologies and new developments and move their treasury management into the real-time world,” Bansal said. “The whole idea behind Citi Token Services was born out of this pressing need by our clients to ensure that their money can move around the global ecosystem in as [close to] real time as possible.”
The bank uses a private permissioned distributed ledger and a distributed database with embedded business logic to enable a range of services from intraday lending, cross-border payments and conditional transfer of funds to supply chain financing, trade settlements and fractional ownership to identity verification and know-your-customer compliance.
Citi Token Services adheres to the ERC-20 technical standard — a community-created framework for creating smart contract-enabled fungible tokens on the ethereum blockchain. The bank owns and manages all the blockchain technology infrastructure it’s using for its token services, which will be integrated into the bank’s global network. Clients will be able to access Citi Token Services through its CitiDirect online portal or API connectivity.
Rugg said multinational companies with hundreds, if not thousands, of accounts with Citi and other banks can use the program to manage liquidity and payments across the globe. Before, they would have to forecast and leave money in different branches as well as keep track of cut-off times and holidays around the world when money can’t be moved.
“Citi Token Services eliminates that need,” Rugg said. “Now you can move it on weekends and holidays. If it’s 5 p.m. Friday in New York and it’s 5 a.m. Saturday you can do that. Or if it’s 1 p.m. in New York and it’s 1 a.m. in Hong Kong, and you realize you have a payment or a liquidity that needs to be in that region, you can move it, and it moves instantaneously where that wasn’t otherwise available to our clients.”
Key to its adoption success was the platform’s ease of use, the bank said. Citi’s developers believed it was essential that the program be seamlessly integrated into its existing platform. Clients do not need to implement additional technology or accounting practices or own or host a blockchain in order to use it. Clients enable transfers through existing methods and are not required to hold tokens. Bansal said this was a “key differentiator” for the bank.
“At the end of the day, our clients are looking for tools and products that are easy to adopt and implement,” Bansal said. “By making these solutions fit into their existing ecosystem without a whole lot of heavy lifting it meets that objective of ease of onboarding and ease of implementation. That, to me, is the one big differentiator that we’ve created. Despite the fact that we’re using novel technologies like digital assets and blockchain and tokens, we’ve made it easy for our clients to deploy these technologies to solve real business problems.”
Rugg said at its core, Citi Token Services is just another payment rail for its clients. Some clients still prefer to use checks and others are keen to adopt the new digital options. She equated its ease of use with the iPhone.
“Apple wasn’t the first smartphone, but the ease of use helped its adoption,” Rugg said. “If it’s a complex technology and it’s hard to use, adoption is just not going to happen. The easier we can make it for the clients and meet them where they are on their journey, the more that we’ll have the ability to scale. In the future, will clients want their own wallets and host their own nodes and manage their own keys? Maybe, and we’ll be able to pivot and provide that service. But we also want to make sure that we create a platform that’s successful from day one as we start to scale.”
Citi handles all token transfers through its back-end infrastructure using nostro accounts, which speeds up the settlement process.
“When designing the platform, we obfuscated the complexity of a blockchain away from our clients who log on to Citi via API or CitiDirect, however they normally do, and then in the background we enabled their account for Citi Token Services and they can instruct us to move a token from New York to Singapore. We mint it in New York, we send it to Singapore, we burn it so it’s cash for cash in their account,” Rugg said.
“That’s important because their ERP and treasury management systems aren’t ready for extra risks and controls around managing tokens,” Rugg said. “We want it for day one, where we are right now, and to meet our clients where they are in their journey and take that complexity away and let us manage a blockchain for them.”
Currently, the service is being offered in the U.S., U.K., Hong Kong and Singapore using live USD transfers. Citi intends to add more corridors and currencies as well as eventually offer automated transfers.
“We targeted our largest money hubs intentionally, where the biggest friction stems from a time zone, but also where the largest money movements happen for our clients,” Rugg said.
Rugg said Citi launched an early adopter program for the service and solicited input from clients to help decide what functions to scale and where to expand to next. Rugg said the process “was really taking a page from my startup book – building for clients by clients” and it proved to be very valuable.
The bank successfully completed its first pilot of the program in September 2023 and a year later launched Citi Token Services for Cash for commercial users as well as Citi Token Services for Trade. The Trade product uses the same money movement process, adding a smart contract to facilitate a conditional payment. Citi Token Services for Trade is only currently being piloted in North America.
“We just launched and already multiple different clients are using the platform on a regular basis now and it’s great to see it really start to scale,” Rugg said. “I think that as we get clarity in the future about different regulatory standards, it’ll expand our use cases and functionality.”
Bansal said Citi is already beginning to see new uses they had not envisioned being implemented.
“I genuinely believe as an industry, we’ve only scratched the surface and we can already see some signs of use cases emerging above and beyond what we initially thought,” Bansal said. “Our initial assumptions and hypotheses revolved around the digital economy clients – the e-commerce clients, who would naturally benefit from faster mobility and financial services, but lo and behold, what we’ve seen is a much more widespread adoption and quite frankly use cases that our clients have brought to the table that we did not think about originally.”