Citigroup’s new partnership with Nasdaq is an indication that the New York bank is pushing hard to find ways to make commercial use of blockchain technology, a top Citi executive said Tuesday.
Citigroup and Nasdaq will use distributed ledger technology to expand and improve securities payments both across borders and for private companies. Blockchain is a distributed ledger system that was originally developed for use with bitcoin. Integrating these technologies can help banks improve liquidity in private securities and increase operational efficiencies.
The Nasdaq agreement announced last month is just one way that Citi is moving to adopt blockchain, Chief Financial Officer John Gerspach said Tuesday.
“We understand fintech, we understand about disruptors,” Gerspach said at the Morgan Stanley Financial Services conference. “We’re not dismissive of it at all.”
Citigroup also has “at least three different experiments going on” at its innovation lab in Dublin, Ireland, that aim to find uses for blockchain technology, Gerspach said. Citi also has a California operation working on blockchain, it has invested in 50 different fintech and other financial startups, and it has finalized commercialization deals with “35 to 40” of those startups, he said.
Citigroup also participated in a $107 million funding round for R3, a consortium that is building a distributed ledger specifically for financial institutions. Citi joined several other financial companies, including Bank of America Merrill Lynch and Bank of New York Mellon, in the investment. And Citi has invested in the New York distributed tech ledger firm Axoni, and it has partnered with the firm on various blockchain projects.
“The question has always been, how do you commercialize blockchain? Is it something to only be used for cryptocurrencies or digital currencies?" Gerspach said. “The answer is, no, we don’t think so."
It’s a sentiment shared by many bankers. About 90% of financial services executives surveyed by a Cognizant said that blockchain technology will be “either critical or important to their firm’s future.” About half of the respondents said the technology will “fundamentally transform” the industry.