Citigroup, one of the largest funders of fossil fuels in the world, is investing in yet another fossil fuel lifeline – Bitcoin.
Citi has been expanding its presence in the cryptocurrency sector by developing services that enable buying and selling Bitcoin, and providing underwriting for Bitcoin mining and other crypto companies to raise capital. These dirty investments contradict Citi’s net zero pledges and commitments to sustainability.
Yet, Citi has not publicly acknowledged Bitcoin’s climate impact or addressed how its investments and products are tied to Bitcoin’s emissions. The operation of large traditional financial companies like Citi in the crypto sector brings a new level of trust and accessibility to Bitcoin, in addition to providing much-needed capital. Together, this support can drive up the price of Bitcoin and, in turn, its energy use and GHG emissions. Most of that energy is generated by dirty fossil fuels which drives the climate crisis and creates local air pollution that harms public health.
One way Citi is connected to Bitcoin is through investment and trading services. In 2021, Citi announced that it would offer bitcoin futures trading for some institutional clients. Citi’s Securities Services team is also partnering with Swiss crypto firm Metaco to build Citi’s digital asset custody capabilities–basically, secure accounts to store digital assets which could eventually include bitcoin. Citi’s Global Wealth Investments arm also formed a Digital Assets Group to expand into crypto. News outlets reported that Citi hired 100 people to work in a blockchain and digital assets division. Yet, there are no signs of that expertise being put to work cleaning-up Bitcoin and creating innovative solutions to move Bitcoin’s consensus mechanism away from the current polluting Proof-of-Work system.
Citi has also helped Bitcoin and crypto industry companies access capital necessary for expanding their operations. The bank provides vital underwriting services for several major crypto industry companies, which helps these firms issue shares and bonds to raise money. Access to capital markets through reputable investment banks like Citi is vital for the expansion of the Bitcoin industry.
One example of this dynamic was Citi’s role as joint manager for a 2021 initial public offering (IPO) by Bitcoin miner Iris Energy. That IPO raised $231.54 million, which the company said would help develop its facilities and buy more mining equipment. Citi controlled 22.5% of the shares and earned $3.65 million in fees. (1)
Citi was also the lead manager for Canaan Inc.’s initial public offering (IPO) in 2019. Canaan is a China-based producer of ASICS, the specialized computers used for Bitcoin mining, that is also expanding into the operation of mining facilities including in Kazakhstan where coal energy use is widespread and Bitcoin mining has met backlash and government restrictions. Citi controlled 54.35% of the shares offered and earned an estimated $3.91 million in fees on the IPO that raised $90 million.
In 2021, Citi was also the sole manager of a $500 million bond private placement for Galaxy Digital Holdings, a crypto investment and finance company that provides financial services for Bitcoin miners and is expanding its own mining operations. (2) Galaxy Digital said it intended to use the capital to fund growth initiatives. Later in 2022, Galaxy helped Bitcoin miner Argo avoid bankruptcy by issuing them a $35 million loan and buying their mining facility in Helios, TX.
Citi has also invested in the largest U.S. crypto exchange, Coinbase, that enables retail and institutional investors to buy, sell, and trade Bitcoin. The services provided by exchanges like Coinbase help drive adoption of Bitcoin and its price which ultimately leads to more energy use. In 2021, Citi was a joint lead manager for the private placement of two different $1 billion bonds for Coinbase, a large raise of capital for the nascent crypto industry. Citi also owns nearly $800,000 in a Coinbase bond. (3)
While Citi does not have an extensive assessment management division, the company still holds shares in 10 Bitcoin mining companies worth about $125,000 including Marathon Digital and Riot Platforms.
Despite expanding services for the crypto industry, Citi appears to know Bitcoin is bad for the climate. In 2021, Citi analysts published a report documenting Bitcoin’s growing energy use and warned that the carbon emissions would likely meet public and regulatory scrutiny. The report highlighted how Bitcoin’s energy consumption would accelerate alongside its price. Yet, Citi’s plans to reach net zero in company financing activities by 2050 and in operations by 2030 as well as reporting on investments in carbon-intensive sectors don’t address Bitcoin related investments and services. Citi is also a founding member of the UN’s Net Zero Banking Alliance and joined the RMI Center for Climate Aligned Finance and the Partnership for Carbon Accounting Financials (PCAF).
Citi needs to live up to their climate commitments and be a leader in cleaning up Bitcoin and helping create innovative solutions that chart a sustainable path forward for cryptocurrencies.
Endnotes
1 Data on underwriting and shareholding was collected from the Bloomberg Terminal, Bloomberg Finance L.P.
2 Data from league tables on the Bloomberg Terminal, Bloomberg Finance L.P.
3 Based on data from Bloomberg Terminal, Bloomberg Finance L.P.
