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Digital Money: Citi Calls Its Adoption Inevitable

Death, taxes and digital money?  The old adage about two things that cannot be avoided seems to have been expanded by Citi, who said to the U.K. government that digital money adoption was inevitable.  This blog describes what prompted Citi to make its digital money proclamation, summarizes their views on digital money benefits, and looks at implications for regulators.


What prompted Citi’s statement?

The U.K. government made a request for information on digital money in late 2014, and Coindesk recently got their hands on a document submitted by global bank Citi to the British Government.  It was submitted in response to a government consultation, and the bitcoin news service got a hold of it via a Freedom of Information request.

In March, the U.K. government posted a 28-page report, entitled “Digital Currencies:  response to the call for information.”  You can see all of the responding companies—beyond Citi—listed in the appendix.

In their response, Citi seems to be recommending that the UK government consider creating its own digital currency.  They state:  “Due to the potential benefits, we believe the adoption of Digital Money is inevitable.”

Note that their usage of the term “Digital Money” does not necessarily mean Bitcoin and/or its ecosystem… as people may think.  Citi goes on to say:  “While we believe that the use of Digital Money is certain, the future of specific crypto-currencies such as Bitcoin is less clear.”


Citi’s views on digital money benefits

 “The greatest benefits of digital currencies can be realised through the government issuing a digital form of legal tender.  This currency would be less expensive, more efficient, and provide greater transparency than current physical legal tender or electronic methods.”

Citi also documented other digital money benefits by specific audience:


  • Lower transaction costs
  • Digital money that can be used with a wide range of technology options is capable of reaching unbanked and under-banked citizens


  • By facilitating real-time payments, businesses benefit from enhanced back-office functionality and lower overhead costs
  • Digital money transacts on an infrastructure that is less expensive, faster and arguably more secure than traditional payment systems


  • Greater transparency at the transaction level enabling governments to decrease overhead and increase efficiency
  • Possibly realise benefits from financial inclusion, increasing the efficiency of government disbursements and addressing fraud and overpayments

Wider economy:

  • By reducing the cost of moving and handling money, digital money increases consumer spending potential and introduces greater liquidity to the market by increasing the velocity of money
  • Potential digitization of components of the existing Financial System


Implications for regulators

Due to digital money’s inherent ability to easily cross borders and jurisdictional controls, Citi acknowledges the need for an international framework to achieve effective regulation.  They recommend the U.K. government work with national and international bodies, agencies and government departments in order to formulate and harmonize regulations.  Citi believes digital money regulation would be best served by leveraging existing regulatory regimes.

The greatest difficulty in complying with financial sanctions regulations is the absence of a robust international digital money framework for KYC and AML.  Citi goes on to state:  “The decision by a government to issue its own digital money would resolve the majority of national AML, KYC and sanctions concerns.  Clearly this creates possible privacy concerns on the side of the citizen, but it could be offset by the additional value digital money provides.”

Citi issues a warning:  “We believe that Governments and the Financial Industry incumbents are not currently leveraging the benefits of emerging technologies and risk similar challenges to that of the Post Office during the shift to digital forms of communication.” 

In closing, it does have a certain ring to it:  “death, taxes and digital money.”  Let us know what you think.  




Comments: (2)

Graham Seel
Graham Seel - BankTech Consulting - Concord 26 May, 2015, 17:01Be the first to give this comment the thumbs up 0 likes

Interesting post, Dan. There is a clear distinction between crypto-currencies and digital money. Actually it could be argued that digital money has been around at least since SWIFT was created 40 years ago - after all the FIN service allows for notional electronic movement of funds through from a consumer or commercial account at one FI to an account at another FI, via correspondent bank relationships, without any cash or paper involvement at all. Actually telegraphic transfers go back to the 19th century, though there was some printing of telexes in that process - but no cash. The emerging technology that supports digital money - such as mobile, enhanced security, and blockchain - is where the innovation is occurring. So Citi are right - adoption of digital money is not only inevitable, it is already ubiquitous in commercial banking.

A Finextra member
A Finextra member 26 May, 2015, 21:401 like 1 like

Thanks for your comments, Graham.  Agree that although 85% of consumer transactions around the world are still conducted using physical cash, digital money is the present/future.  This makes me think of the quote:  "The future has already arrived; it's just not evenly distributed yet." (credit to William Gibson)

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