Citigroup Eyes Stablecoins Amid Shifting Hong Kong and U.S. Regulations

Growing Interest in Stablecoins Amid Regulatory Uncertainty

As the global financial landscape continues to evolve, companies are showing a strong interest in exploring the benefits of stablecoins. These digital tokens, which are typically backed by fiat currencies or other reserve assets, offer a potential solution for instantaneous payments, clearing, and settlements. However, despite this enthusiasm, there remains a need for greater clarity on regulations and use cases, according to a senior executive at Citigroup.

Shahmir Khaliq, head of services at Citigroup based in New York, highlighted that while companies are eager to leverage blockchain technology, they require more defined accounting rules regarding how stablecoins affect balance sheets and liquidity. This need for regulatory clarity is especially crucial as the financial industry moves towards more mainstream adoption of cryptocurrencies and digital assets.

Khaliq also pointed to Hong Kong’s recent stablecoin ordinance, which came into effect in August 2025, as an example of the growing regulatory attention on this space. He emphasized that while the regulatory environment is still in its early stages, the presence of clear guidance from regulators would enable financial institutions like Citigroup to develop new services that support their clients’ business operations.

The Role of Stablecoins in Modern Financial Ecosystems

Stablecoins have emerged as a key tool for investors looking to hold and hedge their crypto assets. However, their applications are still evolving, and many use cases remain under development. As regulatory frameworks become more established, the potential for new use cases is expected to grow, attracting further interest from both consumers and businesses.

Khaliq noted that the ultimate success of stablecoins will depend on factors such as cost and ease of access. For companies, the ability to move funds quickly and efficiently across borders and time zones is becoming increasingly important. This is where traditional financial institutions like Citigroup play a critical role, offering services that bridge the gap between fiat currencies and digital assets.

Citigroup has been actively exploring ways to assist its clients with reserve management, given that stablecoins often require reserves for backing. The bank also aims to facilitate the conversion between fiat currencies and stablecoins, commonly referred to as on- and off-ramp services. According to Khaliq, this linkage is essential for the functioning of a modern financial ecosystem.

Advancements in Token Services and Global Adoption

In response to the growing demand for real-time, around-the-clock payments and settlements, Citigroup introduced token services last year. These services are now live in four markets: the United States, the United Kingdom, Singapore, and, as of April 2025, Hong Kong. Utilizing distributed ledger technology and smart contracts, the services enable seamless and instant movement of liquidity between clients' accounts worldwide.

Since the launch, the adoption of these token services has grown significantly, with the bank processing "billions of dollars" in transaction value. In Hong Kong, major use cases have emerged following the shift to a shorter settlement cycle in the U.S. last year, which increased the need for rapid collateral posting and cash movement.

Khaliq explained that for entities operating in Hong Kong, time zones are a significant consideration. The Citi Token Services allow market participants to move money instantaneously between different time zones, enabling them to continue making payments and maximizing the use of liquidity within their books.

The Future of Blockchain and Digital Assets

The movement towards using blockchain technology for instantaneous settlement and real-time confirmation is seen as a natural progression towards a 24/7, always-on world. Khaliq expressed optimism about the future of digital assets, noting that the financial industry is well-positioned to embrace these innovations.

As the landscape continues to evolve, the role of traditional financial institutions in facilitating the transition to digital assets will remain vital. With ongoing efforts to enhance services and provide clarity on regulatory frameworks, banks like Citigroup are well-placed to support their clients in navigating this rapidly changing environment.