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Citibank testing cryptocurrency as a digital payment platform

bitcoins

Citibank is running a test platform for digital currencies and is planning its own solutions called CitiCoin, reports IBTimes UK. The bank claims to have already constructed three blockchains and a test currency to run across them. These systems are still in the test phases with no real money passing through them.

A blockchain is essentially just a database that maintains the public ledger of transactions for cryptocurrencies, in this case Citicoin. Blockchains are distributed in different locations with each carrying the ledger of transactions, which are then matched to verify if a transaction took place or not. The large number of nodes provide redundancy in case of certain nodes being offline, or having been compromised or hacked.

In Citibank’s case however, it’s unlikely the bank will maintain a public ledger, instead favoring to maintain these servers itself. Interestingly, the bank mentions it is in talks with governments and regulators for the potential of a global blockchain distributed ledger network. If eventually implemented, even only by Citibank, the platform should simplify cross border payments and enable it to transact with smaller local banks without risking or requiring cash collateral.

Citibank mentions that the technology behind Citicoin is not patented and will remain open source. Other than this, the bank mentions that it is currently working on digitising payments and transactions across five domains of which blockchain is only one. However, the bank did not reveal these other ‘domains’.

Cryptocurrency in India: Last year, RBI had announced that it did not intend to regulate virtual currencies in India. Around the same time RBI governor Raghuram Rajan raised questions about the stability of Bitcoin prices. Additionally, the Income Tax department has taken no official stance on the matter, although members in the Indian Bitcoin community were told to pay taxes on the Bitcoin they mined, based on its valuation on the day it was mined.

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In January last year, a notice was sent to the RBI seeking clarification on various aspects around Bitcoin. RBI was asked if it plans to treat virtual currency – as a foreign currency, domestic currency, private currency, commodity, software program or as an electronic document. It was also asked if RBI has the power to regulate virtual currencies and if so, under what law.

Image source: Flickr user BTC Keychain

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