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Citigroup Explores Stablecoin Custody and Crypto ETF Services Amid Regulatory Shift

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Citigroup (C.N) is evaluating the provision of stablecoin custody and related services, signaling growing interest from traditional financial institutions in the cryptocurrency sector, a senior executive told Reuters. The move comes as recent U.S. legislation paves the way for stablecoins—digital tokens pegged to fiat currencies like the U.S. dollar—to be used more broadly for payments, settlements, and other financial services.

Under the new law, stablecoin issuers must hold safe assets, such as U.S. Treasuries or cash, to back their digital coins. This creates potential opportunities for custody banks to provide safekeeping and administration. “Providing custody services for those high-quality assets backing stablecoins is the first option we are looking at,” said Biswarup Chatterjee, global head of partnerships and innovation for Citigroup’s services division. Citi’s services business, covering treasury, cash management, payments, and corporate services, remains a central unit amid ongoing restructuring.

Currently, roughly $250 billion in stablecoins have been issued, primarily for settling cryptocurrency trades, according to a McKinsey study. Citigroup is also considering custody services for digital assets linked to crypto investment products, such as bitcoin ETFs. For instance, BlackRock’s iShares Bitcoin Trust—the largest bitcoin ETF—has around $90 billion in market capitalization, requiring custody of an equivalent amount of digital currency. Coinbase currently dominates this business, serving as custodian for more than 80% of crypto ETF issuers.

In addition to custody, Citigroup is exploring the use of stablecoins to accelerate payments, which in traditional banking can take several days. Citi already offers “tokenized” U.S. dollar transfers via blockchain across New York, London, and Hong Kong 24/7 and is developing services that allow clients to send stablecoins or convert them to dollars for instant payments.

The regulatory environment under the Trump administration has become more accommodating to crypto expansion, though Citi and other firms must still adhere to anti-money laundering, currency control, and other compliance requirements. Chatterjee emphasized that crypto custody must ensure assets are legitimately sourced and maintain robust cybersecurity and operational safeguards. The issuance of a Citi-backed stablecoin is also under consideration.

Cerebras IPO Delayed as US National Security Review Continues

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Cerebras Systems, a California-based AI chipmaker, has experienced further delays in its highly anticipated IPO due to an ongoing national security review by the Committee on Foreign Investment in the United States (CFIUS), sources familiar with the matter confirmed. The delay comes as the company waits for the White House to fill key positions and for CFIUS to conclude its review of a $335 million investment from Abu Dhabi-based cloud computing and AI company G42.

The delay marks a significant hurdle for Cerebras, which has been seeking to go public despite the uncertainty surrounding the approval of G42’s investment. G42’s past ties to China, particularly its connection to Huawei, have drawn scrutiny in Washington. However, the deal had appeared poised for approval late last year before the change in U.S. leadership.

CFIUS, which reviews foreign investments for national security risks, remains cautious about deals involving foreign companies with Chinese links. With the Biden administration’s expansion of CFIUS enforcement, corporate executives have found the regulatory environment less conducive to dealmaking than initially expected.

Despite the ongoing review, Cerebras executives remain optimistic that the investment will eventually be approved, and they intend to proceed with the IPO once the regulatory process is completed. The company’s valuation has nearly doubled since G42’s investment commitment last year, and the IPO remains a crucial step for Cerebras in securing funding for its future growth.

Tech Group Urges U.S. to Halt AI Chip Export Restrictions Amid Growing Concerns

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A coalition of tech companies, including Amazon (AMZN.O), Microsoft (MSFT.O), and Meta (META.O), has urged the Biden administration to reconsider a pending rule that would restrict global access to AI chips. The rule, which could be finalized as soon as Friday, is viewed by the Information Technology Industry Council (ITI) as a threat to U.S. leadership in artificial intelligence.

The proposed rule, backed by the U.S. Commerce Department, aims to regulate AI chip exports to prevent adversaries, particularly China, from gaining access to advanced technologies that could enhance their military capabilities. While the restrictions are framed as a national security measure, industry leaders argue that they could hinder U.S. companies’ ability to compete globally and inadvertently benefit foreign competitors.

In a letter to U.S. Commerce Secretary Gina Raimondo, ITI CEO Jason Oxman expressed concerns about the rushed nature of the rule. Oxman warned that implementing such a consequential policy at the end of President Biden’s term could result in unforeseen consequences, damaging the U.S.’s competitive edge in the rapidly growing AI sector.

The group called for a more measured approach, recommending that any new regulations be introduced as a proposed rule rather than a final one. They stressed the importance of considering the broader geopolitical and economic impact, which could jeopardize the U.S.’s position in global AI development.

The anticipated rule has sparked strong opposition within the tech industry, with the Semiconductor Industry Association and Oracle executives voicing their concerns. Oracle’s executive vice president, Ken Glueck, criticized the measure, describing it as an overly broad regulation that would impact nearly all commercial cloud computing globally.

The Commerce Department and the White House have yet to respond publicly to the mounting criticism, but the issue continues to garner significant attention from both industry leaders and policymakers as the Biden administration enters its final days.