Major Banks Race Into Crypto: Citigroup Pivots to ETF Custody and Digital Payments

Washington’s shifting stance on cryptocurrency has sparked a wave of institutional interest, with Citigroup now joining the ranks of traditional finance giants making strategic moves into digital assets. The banking heavyweight is actively exploring custody solutions for cryptocurrency ETFs and payments infrastructure built on blockchain and stablecoins, capitalizing on what executives view as a pivotal moment for crypto adoption.

The opportunity crystallized when regulatory clarity finally emerged. The U.S. Securities and Exchange Commission’s approval of spot Bitcoin ETFs in 2024 unlocked unprecedented institutional capital flows. Spot Bitcoin ETF assets have ballooned to over $158.6 billion, with BlackRock’s iShares Bitcoin Trust commanding $91 billion alone. This explosive growth has drawn competitors like Fidelity Investments, Grayscale, Ark & 21Shares, and Bitwise into the space—each seeking custody partners to manage assets and ensure regulatory compliance.

Citigroup’s Blockchain and Stablecoin Infrastructure Play

Citigroup isn’t entering the arena unprepared. The bank already operates a tokenized asset platform leveraging blockchain technology for seamless U.S. dollar settlements across major financial hubs—London, New York, and Hong Kong—with round-the-clock processing capability. This existing infrastructure positions Citi to scale into stablecoin payments and ETF custody with relative ease.

The bank’s crypto ambitions align with a broader institutional awakening. Bank of America, Morgan Stanley, JP Morgan, and Fiserv are all pursuing aggressive crypto expansion strategies, recognizing that regulatory tailwinds and landmark stablecoin legislation have normalized digital asset services within traditional banking.

Confronting the Custody Consolidation Challenge

Here’s where Citigroup faces its steepest climb: the ETF custody market remains heavily concentrated. Coinbase, the dominant U.S. crypto exchange, controls custodian relationships for over 80% of existing spot cryptocurrency ETFs. For Citi to gain meaningful market share, it will need to differentiate through superior infrastructure, regulatory credentials, and integration with its sprawling banking ecosystem.

The regulatory environment itself has become Citi’s greatest asset. Significant stablecoin legislation and updated banking guidelines have legitimized crypto services at the institutional level, creating an opening for traditional custodians to compete against specialized crypto exchanges. Whether Citigroup can convert this regulatory advantage into market penetration remains the critical question as blockchain-based ETFs continue their meteoric rise.