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HMT Call for Information on Digital Money Citi December 3rd 2014

Introduction

This response is provided by Citi’s Treasury and Trade Services (TTS) Technology & Innovation Team. TTS processes nearly 2 Billion transactions yearly moves more than !S" # Trillion in daily transaction $lo%s and is a Baning license holder in ' countries including  emerging countriesCiti aspires to the be *orld’s "igital Ban and employs a net%or o$ innovation labs thatis currently investigating the scope and potential o$ "igital +oney as an innovation complementary to global $inancial services. "ue to the potential bene$its %e believe that the adoption o$ "igital +oney is inevitable. *hile %e believe that the use o$ "igital +oney is certain the $uture o$ speci$ic crypto,currencies such as Bitcoin is less clear. !ltimately Bitcoin’s bene$its %ill be reali-ed through the application o$ the underlying distributed ledger technology (i.e. blocchain) to provide an etensible decentralised trust%orthy and generic transaction store.Companies are currently developing applications utili-ing Bitcoin’s underlying technical innovations to increase transparency and e$$iciency bene$itting consumers merchants governments and regulators alie.!sing such technology there is a clear opportunity to reduce the cost o$ moving and handling money increase consumer spending and introduce greater li/uidity to the maret.The digital ledger o$ transactions can be used to enable the digiti-ation o$ components o$ the current 0inancial System. The implementation o$ %hich %ould establish an etensible decentrali-ed trust%orthy and immutable generic transaction store that enables encoding o$ business logic la%s and other rules.1o%ever %e believe that overnments and the 0inancial Industry incumbents are not currently leveraging the bene$its o$ emerging technologies and ris similar challenges to that o$ the 3ost 4$$ice during the shi$t to digital $orms o$ communication.The greatest bene$its o$ digital currencies can be realised through the government issuing a digital $orm o$ legal tender. This currency %ould be less epensive more e$$icient and provide greater transparency than current physical legal tender or electronic methods.

Question 1

What are the benefits of digital currencies?

*e believe the bene$its are realised through the application o$ the underlying technologyto provide an etensible decentralised trust%orthy and generic transaction store to solve a %ide variety o$ problems. !sing such technology there is an opportunity to reduce costso$ handling cash increase spending and to move money to the $ormal economy as a result o$ the adoption o$ digital currency.

How significant are these benefits?

*e believe there could be very signi$icant bene$its in t%o areas5 6) +aing transactions more e$$icient in some segments o$ the $inancial system %here barriers to entry or regulation produce arti$icially %ide spreads. 2) !sing the blocchain technology to mae and eep trac o$ $inancial and non$inancial asset transactions in a permanent accounting record.

How do these benefits fall to different groups e.g. consumers, businesses, government, the wider economy?

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Consumers could eperience

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7o%er transaction costs

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"igital currency that can be used %ith a %ide range o$ technology options is capable o$ reaching unbaned and underbaned citi-ens.

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Businesses could eperience

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By $acilitating real,time payments and enabling business logic at the transaction level "igital +oney could allo% businesses to bene$it $rom enhanced bac,o$$ice $unctionality (including cash management capabilities) and lo%er overhead costs.