Citi Developing Token Services for Institutional Clients

City announced recently it's developing token services for institutional clients. Joining us now to discuss is Ryan Rug, global head of digital assets for cities Treasury and Trade Solutions, along with Steven Randall, global head of liquidity management services for City Treasury and Trade Solutions. Welcome to the show, Ryan and Steve at. It's all right, let's talk about this pilot. There was a pilot for city Token Services. Smart contracts were used to serve the same purpose as bank guarantees and letters of credit. You worked with the shipping company, Maersk, talk to us about what happened. What was the benefit here for Maersk? No, that's great. Thanks for the question. I appreciate it. So last month we announced City Token Services for cash and for trade. And what we did was we took tokenized deposits and we pre funded a smart contract for trade. So in this case with me, you know, if they were passing through the canal, they were able to fund a smart contract and if a set of conditions were met, the funds were released and you could think about in trade. It's a very paper written business operationally and typically only works during banking hours. So really adding efficiency for that and for the cash piece, I'll turn it over to Steven who's head of uh liquidity first. Yeah, thanks Brian. So, so in terms of what we do in liquidity management services, we help clients manage their cash and liquidity. So what City Token services does it aims to address those client pain points uh with the current settlement systems? And so what what we did with this effectively for the merc transaction is we used and leverage that uh City token services for cash and tokenize those deposits on Blockchain in order to be able to reduce friction and, and make it more seamless for our clients. So uh does this actually uh I was there a need for doing it on Blockchain? Why couldn't it be done on a centralized database? Uh What, what kind of things can be offset if you will, you, you talk about liquidity here. Uh You know what kind of tokens were, were, were transact uh uh were, were exchanged in the process to, to do all this and I is there any connection with the overall markets that that somebody let's say could, could offset the risk using uh crypto markets for instance? Yeah. So, so what City Token services for cash does is it uses tokenized deposits on an internal Blockchain uh to enable corporate clients to move money between their accounts around the city network instantaneously on a 24 by seven basis. The first two branches that we using a New York and Singapore for internal us dollar transactions. So this service aims to reduce the friction of that client liquidity management by leveraging it internally. And so the clients get the benefits externally. So hopefully, hopefully that that helps answer that question, Ryan. Yeah. Yeah. And if you think about, you know, I get asked that question all the time. Do you need a Blockchain? Why are you using a Blockchain? Because you know another, you know, technology have been used and it's, it's not about the technology, it's about what our clients want and what our clients want is cross border multibank liquidity, right? They want to be able to move money 24 73 65 and make it programmable. So for that, the best technology and we evaluated numerous, to be honest was a, was a permission Blockchain because if you think of the work that we've done with the regulated liability network and the fed and a consortium of banks, how do you connect disparate parties that don't normally trust one another into, into one ledger? So yes, you know, today with an internal use case, do you technically need a Blockchain? But in the future to be able to provide that 24 7 cross border cross bank liquidity, you do and, and, and, and what sort of uh uh what sort of platform did you use it? It was it based off of a theory. What, what, what exactly were you using here for it? Yeah, we use, er, C 20 tokens EBM compatible. Um, it was a private permission version of Ethereum though that we were on but open source, it, it was very important that, you know, we're future proofing our infrastructure also. And what kind of interest are you seeing from institutional clients? I mean, is this something that, because there's a lot of, you know, different accounts out there about institutions interest in in this kind of thing. Are you seeing a AAA strong, strong interest? Yeah, absolutely. We've definitely seen a lot of interest in this which is very positive in the market. And you know, as mentioned like this is just one of the solutions that city is developing. But, you know, COVID exasperated this digital economy that we're in and the need for always on infrastructure. And how are we going to be able to provide that? And city token services is one of them. So, you know, the first two use cases that we kind of rolled out that we're alive with are for cash and for trade. Um But with the aspirations of kind of expanding that, as I mentioned with RLN and other initiatives that we're working on any plans to use the public Blockchain. That's a great question that's gonna really depend on regulation right currently, right now, within the we are, you know, we do not operate in the gray area. Right, you know, and with right now with the regulatory regime that we're in and like the guidance that we have, we can only be on permission change. So we have no aspirations unless regulation changes go to going public on the topic of regulation. When you're testing, when you're doing pilots with companies like me, what kind of questions are they asking when it comes to regulation? Are things like the Sam Beman free trial affecting how they view the technology and they view working um with you on projects like this. So we've made it seamless into our infrastructure and that was by design. So we've often skated all of the complexities with a Blockchain and made it seamless for our client. So, you know, you log on to your typical city direct account or through an API and have like a seamless experience. So for them, it's not a lot of questions about, you know, kind of what's going on in the space because they know that from a, you know, infrastructure standpoint, it's fully integrated into our systems. So uh Stephen and then Ryan, you know, what kind of, what kind of institutions are you guys seeing uh asking for these kind of services? You know, we asked if there was any interest but I it it how does it look, I obviously a a big company but anybody else? Yeah, I'll take that first and then, right, I, I think across the spectrum if you think about, you know, the the the the client base we serve there, there's there's a diverse interest across different, different sectors. So some of some of those clients are further, further advanced in, in their thinking in this space. And so, you know, in terms of the test transactions that we do that they are the but others are still sort of evolving their thinking. So the way I would think about it is as we evolve and we're at the, the sort of this, the the innovation uh stage of this, there are certain clients that are, are partnering with us on, on this through the, through the test phase and others that that will, will come on board as they've seen others and they've seen the use cases evolve. Yeah, I couldn't agree more, definitely more innovative clients we're kind of engaged with right now that are, you know, testing it and making sure that from a, you know, it's actually serving their use case and helping us to like really co develop and collaborate with us on our road map as well, you know, we want to make sure that this, you know, really solves the pain point that they're trying to do and that, you know, always on infrastructure 24 7, 365. So if it's 5 p.m. in New York on Friday and 5 a.m. in Singapore, they're able to send money to be able to have that, you know, because currently right now, like liquidity is trapped in many different areas and it's an inefficient use of liquidity being able to not, you know, having to send it, you know, two or three days prior versus being able to, you know, invest it in our money. So really being able to enable our clients to do that and especially like the kind of the early adopters in this program. But besides shipping many other industries, yeah, we've seen multiple industries interest especially, you know, now that we have the announcement out there that where it's it's really diverse because anything that you can think of like where you have paper written contracts, right to be able to pre fund them and automate that process. And so if you know, in this case with me, a set of services were received, so if the ship received fuel or was washed or whatever the case is, the conditions are met, the funds are automatically released first having to have, you know, paper written kind of contracts. So you could see the applicability in multiple different industries across the space here. Yeah, it's, it's not one sector, it's not one industry. It it's it's depending on the footprint of that, that sector or industry as to and their evolution in in that space as to their, their adap adaptability of this Stephen Ryan. Thanks so much for joining the show this morning. Thanks for having us. I appreciate it. That was Ryan Rug and Steven Randall from City Treasury and Trade Solutions Business.