Citi Securities Services found that almost 90% of market participants are actively engaged in or exploring use cases for digital assets, blockchain or distributed ledger technology (DLT).
The actively engaged comprised 47% of respondents versus 41% in the exploration phase.
With over $25 trillion in assets under custody, Citi is the fourth largest custodian in the world.
Digital assets are viewed as a business opportunity and blockchain and DLT is seen as a path to address several issues in the securities sector. There’s a move towards shortening standard settlement times from two days (T+2) to one (T+1) to reduce counterparty risk. In the United States, the SEC kicked off a plan to move towards T+1 and there are similar initiatives in Canada and India.
In last year’s Citi survey, 40% of respondents viewed DLT as core to shortening settlement times, but that’s now down to 21%, with many believing DLT has a role but is not essential. Instead the emphasis has moved to upgrading existing infrastructures.
The ultimate shortening is instant or atomic settlement. Seventy nine percent believe that’s achievable within ten years.
DLT is seen as a useful tool for post trade efficiencies, with 54% of respondents envisaging it reducing costs by 10-30%.
Some believe that efficiencies hold far less allure than revenue opportunities. On that point, 92% view tokenization as a tool to improve liquidity and increase the range of tradeable assets.
Divergent views on digital currencies
A dozen financial market infrastructures (FMIs) participated, and they believe digital money is inevitable but is likely to happen after 2026 for securities settlement. In contrast, 73% of market participants believe that digital money will be used for settlement by 2026.
The drivers are seen as the settlement of digital assets and 24/7 cash movements. The FMIs believe the digital currency will be a CBDC.
Apart from the FMIs, participants in the survey include 300 other institutions, including banks (47%), broker dealers, asset managers, custodians and investors.
Meanwhile, Fidelity Digital Assets also ran an institutional survey but targeting a different audience – on the investment end. There was a significant disparity in digital asset adoption between Crypto and VC hedge funds and high net worth investors (both are notable adopters) versus traditional hedge funds, endowments and pension funds, where adoption was under 10%.
Update: the section on digital currencies was added post publication