In light of the splash JPMorgan made recently with its plan for a bank-backed cryptocurrency, it’s worth remembering another big institution first tested a token to connect global payments – back in 2015.

Codenamed “Citicoin,” the project out of Citigroup’s innovation lab in Dublin was never formally announced by the bank, even as a proof of concept. The idea was to streamline global payment processes. As such, there are obvious parallels with the much-vaunted JPM Coin.

However, having taken stock of the experiment (not to mention the scorn of the bitcoin community at that time) Citi concluded that, while the technology has the potential to live up to its promises, there were other more effective and efficient ways of making improvements in payments.

That’s according to Citi’s current innovation lab chief, Gulru Atak, global head of innovation for treasury and trade solutions (TTS). Regarding the crypto experiments of her predecessors, she told CoinDesk:

“Based on our learnings from that experiment we actually decided to make meaningful improvements in the existing rails by leveraging the payments ecosystem and within that ecosystem, we are considering the fintechs as well or the regulators around the world as well, including SWIFT.”

Taking a measured step back, Atak said when it comes to improving cross-border payments, the bank is looking at effective methods but with a shorter-term impact. “We are trying to make those changes today, rather than just putting all our efforts into future technology,” she said.

After all, to completely change a cross-border payment network with blockchain-enabled technology, one would have to on-board all the world’s banks, Atak said, adding:

“If we are talking about cross border payments, how many banks do we have across the world – and how many of them are already on-boarded on SWIFT? And how long has it taken SWIFT to onboard all those banks?”

As such, Citi’s blockchain strategy in recent years has been about finding ways to integrate legacy systems, said Atak, citing the bank’s 2017 partnership with Nasdaq, CitiConnect, designed to streamline payments around private securities. That project, she said, also has parallels with JPM Coin.

“[CitiConnect] didn’t issue stablecoins but the infrastructure that was used was similar to issuing coins on a blockchain platform,” Atak said. “But it was purely to integrate into a blockchain-enabled system on our client’s end and make it connect to our legacy payment processes real-time.”

From trade finance to FX

While Atak was happy to reflect on previous blockchain initiatives, she also pointed out that Citi certainly continues to explore blockchain, especially in areas like trade finance.

This niche is a more realistic use case, she said, because building an ecosystem for trade finance doesn’t require as many banks as a full-blown cross-border payments system. “Our focus is currently more in the trade space and trade finance and trade letters of credit. We are experimenting with this technology but probably we are a little bit, like, reserved when it comes to making bold public announcements.”

Rival global bank HSBC is not so shy about beating its chest. In January, HSBC announced it had settled $250 billion of foreign exchange (FX) trades using a blockchain over the past year.

Regarding FX, Opeyemi Olomo, blockchain lead from Citi’s Innovation Lab, said there are clear pain points in that market, which has issues around credit transparency. As with global payments, the question of whether to apply blockchain comes down to building an ecosystem and how onerous that process would be in relation to the benefit.

Olomo agreed there is an opportunity.

“There is a niche ecosystem and if you look at liquidity providers in the FX space, the major liquidity providers are not that many. So that’s an ecosystem where you could maybe think of it and have like five or six together and you can start actually creating a difference,” he said.

Broadly speaking, Atak said many industries are pushing hard to move existing instruments to a blockchain-enabled platform without necessarily thinking why that instrument exists from the very beginning.

Instead, a close examination of the very nature of financial instruments might be required, she said. “For example, how did a human being come up with a banking instrument called a letter of credit? What were the issues that led to its creation?”

This philosophical approach will guide Citi’s thinking, Atak added, concluding:

“I am challenging ourselves as well: are we looking to this technology to its best potential or are we just trying to get rid of the current friction and operational inefficiency in the system?

This article has been updated to reflect that custody solutions are not part of the TTS business and does not fall within Gulru Atak’s mandate.

Citibank image via Shutterstock