2026 Perspectives for the Public Sector

Leadership in Action: Digital Asset Custody Capabilities Citi’s global digital asset custody capabilities are seamlessly integrated with traditional custody services, enabling interaction with various external blockchains and assets to facilitate flows. Citi is partnering with digital FMIs such as Euroclear’s D-FMI and SDX to provide custody for a range of digital securities. For example, Citi is enabling clients to access bonds via the bank’s custody capabilities on SDX, deliveringmore efficient bond investing and shorter settlement cycles. Due to the significant increase in demand for access to digital assets via custody capabilities and the growing issuance of tokenized securities, Citi is also exploring digital asset custody wallet capabilities for public blockchain-based assets. As a result, clients will gain the ability to hold and transfer digital assets issued on public blockchains through Citi, helping to support evolving strategies around new digital networks and emerging asset classes. 7 https://www.pewresearch.org/short-reads/2025/08/12/what-to-know-about-the-bond-market/ Benefits and Challenges for the Public Sector The bonds and exchange-traded notes that underpin global credit markets are becoming increasingly digitized, enabled by the creation of digital financial market infrastructure, tokenized bond issuance platforms, and end-to-end value chains to support the entire digital bond lifecycle from issuance to asset servicing. Public sector organizations are not only choosing to issue digital bonds over traditional bonds but are also creating innovative new solutions to increase market efficiency and transparency. Since the first global blockchain bond was issued in 2018, it has become clear that digital bonds offer many benefits when compared to traditional bond issuances. One of the primary benefits of digital bonds is their increased operational efficiency, as the use of DLT and smart contracts can enable both faster issuance and settlement. Digital bonds can also significantly reduce expenses for issuers and investors, as fewer intermediaries need to be involved throughout the transaction lifecycle. Innovations such as the fractionalization and 24/7 trading of securities also enable increased liquidity and help to crowd-in a wider range of investors. At the same time, there are still many challenges that need to be addressed before these instruments can become more widely accepted and integrated into global debt markets. Regulatory uncertainty is a key hurdle, as many jurisdictions have not yet established laws that clearly outline and enforce how digital assets can be owned and transferred. Scalability can also be a challenge, as current blockchain infrastructure is limited and not yet capable of handling the volumes required for the global fixed income market — valued at over $145 trillion 7 — to function effectively. Additionally, the lack of interoperability between platforms can make it difficult for digital bonds to be easily transferred from one blockchain to another. It is important to recognize that the digital bond market is still in its early stages, and many of the key challenges will be addressed over time as regulators and new players in both the public and private sectors become more focused on this space. In the coming years, many more milestones will be reached as digital bonds —and digital assets more broadly — continue to revolutionize the financial ecosystem. Citi Perspectives for the Public Sector 53