Wall Street banking giant Citigroup is reviewing its crypto custody partnership with Swiss provider Metaco, according to a report by Bloomberg. The report cites ‘people with knowledge of the matter’ who said that the firm has already started informal talks with other providers.
Citigroup announced its partnership with Metaco in June last year, with the stated intention, “to fully integrate METACO’s bank-grade digital asset custody and orchestration platform, Harmonize, into its existing infrastructure, to develop and pilot digital asset custody capabilities.”
So what could have caused the bank to suddenly go cold on Metaco just one year into the partnership?
As we recently Observed, in May Metaco was acquired by Ripple in a deal worth $250 million. The crypto payments network was reportedly hoping to both expand its product suite and gain access to several major international banking clients. However, when announcing the buyout, Ripple did state that Metaco would continue to operate as an independent business under founder and CEO Adrien Treccani.
It is just possible that you may also have heard of Ripple’s ongoing legal dispute with the United States Securities and Exchange Commission (SEC), which has been hounding the company through the courts since December 2020. The SEC alleges that Ripple engaged in an unregistered securities offering through the initial sale of its XRP token.
So did Ripple try to leverage its ownership of Metaco to over-aggressively harangue Citibank into signing up as a member of its RippleNet service? Is Citibank so wary of attracting the undue negative attention of the SEC that it felt the need to swiftly disassociate itself from Metaco following the custodian’s acquisition by the regulator’s crypto enemy #1?
Or did a year of development and pilot schemes simply reveal that Metaco’s Harmonize platform ultimately wasn’t actually as great a fit for Citigroup’s needs as it had envisioned?
Although in fairness this last option would seem rather unlikely, especially considering the testimonial from the Global Head of DLT & Digital Innovation at Citi Securities Services, Ryan Marsh, which is still proudly displayed on the Metaco website at time of press:
“We selected Metaco Harmonize after a rigorous process, being impressed by the platform’s bank-grade security architecture, its asset-agnostic compliance frameworks, and its unique capabilities for deployment and integration, which match our global technological, operating and servicing model.”
Perhaps we will never find out. Perhaps, after reviewing the alternatives, Citigroup will decide to maintain its partnership with Metaco, although one might imagine that Citi’s reported courting of other custodians may leave the relationship with a somewhat bitter taste.
Either way, it isn’t as though Metaco is short of blue-chip clients. As Observers reported in February when Germany’s DekaBank signed up to the Harmonize platform, Metaco is fast becoming the go-to provider of crypto custody services for major global banks and financial institutions.
With clients like BNP Paribas, Société Générale, BBVA, UnionBank, the aforementioned DekaBank and DZ Bank, none of whom are likely to be swayed by the opinion of the increasingly crypto-trigger-happy SEC, it would seem like Citigroup has more to lose from walking away from the partnership.
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