International Markets

Artificial Intelligence (AI)

Citi Institute

Ahead of Citi’s upcoming India Conference, we spoke with K. Balasubramanian, Citi’s Chief Country Officer for India, about the forces driving India’s rise, the role of technology and capital in shaping its future and how Citi is supporting the country’s economic transformation. &nbsp;

India’s Trust-Powered Ascent

Dive into engaging conversations with leading experts who are shaping the narrative on issues that matter most.&nbsp;

Citi Institute Q&A

<ul><li>Regulatory Clarity is the Catalyst for Adoption: Major financial institutions like Citi require a clear regulatory framework before fully engaging with digital assets. Recent and anticipated legislative changes in the U.S. and globally are paving the way for broader institutional involvement in areas like crypto custody and stablecoins.</li><li>Tokenization Enables "Always-On" Finance: Technologies like Citi Token Services (CTS) are overcoming the limitations of traditional banking hours. By enabling 24/7/365 payments and liquidity, tokenization eliminates inefficiencies, as demonstrated by seamless fund transfers between Singapore and the U.S. during market closures.</li><li>Smart Contracts and Tokenization are Reshaping All of Finance: Beyond just payments, tokenization is transforming capital markets. It allows for the efficient issuance of digital bonds, instant settlement of assets ("atomic settlement"), and the automation of complex, paper-driven processes like trade finance, ultimately reducing costs and increasing transparency.</li></ul>

This Q&amp;A was adapted from a <a href="https://www.citigroup.com/global/insights/tokenization-and-the-shift-to-24_7-finance" target="_blank">Citi Institute Podcast episode</a> and has been edited for clarity and brevity.&nbsp;Ronit Ghose: Digital assets have been a topic for years, but we're in a particularly interesting time, especially with regards to institutional adoption and regulatory changes in the U.S. and globally. We’ve seen some regulatory clarity emerge—Trump's executive order and an interpretive letter from banking regulators. Can you break these down?Ryan Rugg: Regulatory clarity is critical. Citi, like other large banks, won’t operate in a gray area—we need a clear framework before engaging. Recently, the OCC’s 1179 process (which required banks to seek regulatory non-objection for activities in digital assets) was repealed, along with the SEC’s SAB 121, which prevented large banks from custodying crypto assets. Citi is in frequent dialogue with regulators and legislators to ensure digital assets are integrated safely into financial services. We expect this year to bring even broader regulatory clarity, which will expand opportunities.Ghose: Outside the U.S., we’ve seen Europe introduce MiCA, the UAE establish a dedicated digital asset regulator, and Singapore continue leading the way. What’s Citi’s global view?Rugg: Citi follows U.S. law as a U.S.-domiciled bank, but we also work closely with global regulators in key markets like the UK, Singapore, and the EU. In each jurisdiction, we ensure regulatory compliance before launching new services. For example, Citi Token Services for Cash (CTS) operates in the U.S., UK, and Singapore, aligning with regional regulatory frameworks.

With CTS, payments move 24/7/365, eliminating inefficiencies. For example, during Chinese New Year, a client was able to move funds between Singapore and the U.S. when local markets were closed, ensuring payments weren’t interrupted.

Ghose: What is Citi Token Services for Cash?Rugg: CTS launched in September to address real-time liquidity and payments across multiple jurisdictions. Our clients wanted multi-bank, always-on payment solutions. Traditionally, they had to park cash buffers in different regions to ensure liquidity for payments. With CTS, payments move 24/7/365, eliminating inefficiencies. For example, during Chinese New Year, a client was able to move funds between Singapore and the U.S. when local markets were closed, ensuring payments weren’t interrupted.Ghose: Citi’s traditional banking rails handle huge volumes—around $4 trillion per day—but they operate at "human speed"—shutting down on weekends and evenings. What problem is a product like CTS solving for?Rugg: One of the unique attributes of blockchain is the ability to have smart contracts. Which is another way of saying, if this happens, then do that. We did a pilot last year with ships in a canal ecosystem where, typically, they have to have letters of credit to be able to pass through, and only during traditional banking hours. We took our tokenized deposits and pre-funded a smart contract that said, if the ship receives fuel, automatically release payment. I would say CTS is just scratching the surface by enabling our clients to have this always on payments capability, but being able to add the programmability of it I think is a huge benefit to our clients for the future.Ghose: Let’s break down programmability—what does that mean in financial services?Rugg: We often joke that a smart contract is not actually smart or a contract—it’s just code that automates transactions based on predefined rules. Going back to my earlier example: If an account balance drops below $100M, transfer $50M from Singapore. It’s about really automating the process versus having to have the checks and balances of humans in it, to be able to actually use code as the ability to be able to send money. So making money smart is what we call it because then it actually becomes completely digitized.Ghose: Tokenization extends beyond payments—how do you see it evolving across capital markets and financial services in the next 5-10 years?Rugg: Tokenization is reshaping financial services, especially in areas like the efficient issuance of digital bonds, custody settlement, and tokenizing traditional assets like bonds, real estate, and money markets. It can enable the instantaneous movement of assets as well as liquidity and payments.We talk about the “Holy Grail” being atomic settlement (instant trade &amp; payment clearance). Instead of relying on multiple intermediaries, tokenization could allow assets to settle in real time without intermediaries or messaging delays.Ghose: We’ve talked about major players like BlackRock, Fidelity, and Franklin Templeton entering this space. How do you see this evolving?Rugg: Initially, the focus was on tokenizing everything—mortgages, bonds, equities. But the challenge was always settlement—we still had to go back to traditional rails. Now, we're seeing real growth in money markets and tokenized deposits. Large asset managers see tokenization as a way to improve liquidity and operational efficiency while reducing risk. &nbsp;Ghose: Why take existing financial assets and put them on chain? Seems very complicated and duplicative and hard to do?Rugg: The benefits depend on the asset class. It’s a broad ecosystem that includes everything from assets like equities and bonds, as well as real estate and other things. Because there's so many different flavors and types, it's used for different reasons. Some of them are for efficiency plays, some of them for a store of value, some of them are for moving money without a third party.So, for example, tokenized deposits were developed to enable instantaneous movement of payment and liquidity. Money markets could be tokenized for collateral purposes. For asset backed securities, which includes repos, bonds, and equities, tokenization allows automation, which lowers operational costs, adds efficiencies and creates transparency across the asset’s lifecycle. Then there’s taking very paper-driven businesses such as trade (think of our boat passing through the canal with its letter of credit) and being able to create smart contracts. And then there are stablecoins which were created because of the volatility in crypto.Ghose: Let’s talk about crypto and stablecoins. Banks haven’t traditionally been involved—what’s changing?Rugg: It really depends on legislation. There are currently two draft bills proposed in Congress that could provide&nbsp; regulatory clarity for stablecoins. If legislation on stablecoins is passed, this could open the door for more institutional involvement in stablecoins and tokenized assets.As I mentioned earlier, banks won’t participate if there's not clear regulation out there. That's why Citi focused on CTS first. Being able to automate that whole fiat side of it, to have that be 24/7/365 is definitely needed in all digital asset markets.But as we saw with the growth in the ETF market once the SEC approved it, I expect demand to continue to grow as more large enterprises enter this space.Ghose: The coming years will be pivotal for tokenization, digital assets, and institutional crypto adoption.Rugg: Absolutely. We’re just scratching the surface of what’s possible.

The digital asset landscape is evolving fast, with institutional adoption accelerating as regulations take shape. In this Q&amp;A, Citi Institute’s Ronit Ghose speaks with Ryan Rugg, Head of Digital Assets for Citi’s Treasury and Trade Solutions, about key developments in tokenization, blockchain, and regulatory shifts driving institutional adoption. We explore how smart contracts, automation, and tokenization have the potential to reshape financial services.

How Tokenized Payments are Enabling Real-Time Liquidity

<ul><li>Significant Market Growth: The family office market is a major financial force, managing $3.1 trillion in assets globally. This figure is projected to surge to $5.4 trillion by 2030, highlighting a period of substantial growth and influence.</li><li>Distinct Investment Strategy: Family offices invest for the long term, often thinking in multi-generational terms. This approach leads to a significantly different asset allocation, with 40% to 55% in illiquid assets (like private equity and real estate), compared to just 25% for typical private investors.</li><li>Rapid AI Adoption: Family offices are aggressively embracing artificial intelligence. A recent survey revealed that 80% have either already invested in AI or are planning to, positioning them as key catalysts in the development of the AI-driven economy.</li></ul>

<h4>What are the characteristics of the global family office market?</h4>Family offices are established by wealthy families to manage their diverse needs. They often provide services ranging from investment management, accounting, tax, and even administrative services and lifestyle management. They may also provide families with advice on philanthropy and charitable giving and be involved in corporate and investment banking transactions concerning the operating business or direct investments.There are over 8,0001 single-family offices worldwide . The families they service typically have assets worth more than $500 million. The offices &nbsp; own operating businesses and hold investments in private equity, private credit, real estate and direct investments, as well as endowment-style public market portfolios. Over the past years, they have become sizable market participants and Deloitte estimates that family offices globally have $3.1 trillion in assets under management, which is expected to rise to $5.4 trillion in 20302. Citi works with 1,800 family offices with an average net worth of $2.4 billion. We work with some family offices that have hundreds of employees working for a handful of family members, and some that service 1,600 members of the same family. The average family office has less than seven employees and outsources many of its services.&nbsp;

Our data  shows that 70% of families who have family offices are active in more than one continent – the majority have passports, investment assets, operating companies, or family members in more than one region. 

<h4>How do geopolitics affect your clients?&nbsp;</h4>Our data &nbsp;shows that 70% of families who have family offices are active in more than one continent – the majority have passports, investment assets, operating companies, or family members in more than one region. If they anticipate something could go awry in one region (such as war or asset controls), they have the ability to diversify into another region as a secondary location for personal and asset safety.&nbsp;But that begs the question of which regions to choose for such diversification strategies. Citi Private Bank &nbsp;published a whitepaper ‘Asset Location and Global Mobility3 last September. In it, we outlined &nbsp;a framework to evaluate where they want to be located. The four pillars are lifestyle, tax, stability and predictability of the political and legal system, and resources (talent and infrastructure).&nbsp;<h4>How do family offices view artificial intelligence?</h4>AI seems to be different from previous technological innovations. Citi’s 2024 Global Family Office Survey found that 80% of respondents indicated they have either invested in AI or want to4. Family offices are accessing the sector through private and public markets, which enables them to invest into the full AI lifecycle and ecosystem.&nbsp;There is no doubt that artificial intelligence (AI) will fundamentally change the way we work and live.The pervasiveness of the technology leads to broader themes that we are currently discussing with clients, such as energy (nuclear, alternatives and fossil fuels), deep tech, fintech, education, and healthcare.&nbsp; &nbsp;<h4>How do family offices differ from other investors?</h4>Large family offices with more than $500 million in assets think multi-generationally. They invest for the next hundred years rather than the next quarter. Correspondingly, their asset allocation typically has &nbsp;a higher weighting toward alternatives and illiquid assets than other investors.&nbsp;In that way, they function more like a sovereign wealth fund or a university endowment. A typical private investor allocates about 25% to private equity and private credit. For the average family office that we work with, the allocation to illiquid assets – private equity, private credit, and direct investments in real estate – is somewhere between 40% and 55%.&nbsp;Again, it has to do with their long-term horizon. On the one hand that is important because over the last 20 years alternative assets have driven investment returns. On the other hand, a lot of the investment themes such as healthcare, energy, and fintech are only accessible in the private markets. In that way family offices can act as a catalyst in transforming today’s economy into the AI-driven economy of the future.&nbsp; &nbsp;<h4>Your team also offers advice on philanthropic giving and art?</h4>Many wealthy families believe that with success comes the responsibility to give back. Historically, philanthropy by wealthy families was about giving money to a cause they support and expecting to see the donor’s name on, say, a building in return. Increasingly, modern philanthropy is about effectiveness. It is important to spend time with clients to help them determine what their philanthropic goals are and how they can ensure their donation money is used effectively. This is especially important among the younger generation, which is increasingly impact-oriented.&nbsp;<hr>1 Deloitte, <a href="https://www.deloitte.com/content/dam/assets-shared/docs/services/deloitte-private/2024/2024-defining-the-family-office-landscape-report.pdf">Defining the Family Office Landscape 2024</a> 2 Deloitte, <a href="https://www.deloitte.com/content/dam/assets-shared/docs/services/deloitte-private/2024/2024-defining-the-family-office-landscape-report.pdf">Defining the Family Office Landscape, 2024</a> 3 Citi Private Bank, <a href="https://www.privatebank.citibank.com/doc/family-office/asset-location-global-mobility.pdf.coredownload.inline.pdf">Asset Location &amp; global mobility, Challenges and strategies for global families</a>, 2024 4 Citi Private Bank, <a href="https://www.privatebank.citibank.com/doc/family-office/global-family-office-2024-survey-insights.pdf.coredownload.inline.pdf">Global Family Office 2024 Survey Insights</a> &nbsp;

Citi Institute recently caught up with Hannes Hofmann, Head of Global Family Office Group, Citi Private Bank, to discuss key trends impacting family offices, ranging from geopolitics and artificial intelligence to philanthropy and art. &nbsp;

A Family Affair - Embracing AI in a Changing World

(The following is a transcript of this conversation. It has been edited for clarity and brevity.)&nbsp;What is agentic AI, and how is it different from generative AI?Ronit Ghose: We’ve all heard about generative AI over the last couple of years. How do you define agentic AI?Dr. Prag Sharma: Artificial intelligence is difficult to define because it combines many different disciplines. Generative AI is one branch, where language models are designed to create new content. Agentic AI is similar, but with an added layer: the ability to take action. It’s about combining content generation with the capacity to act on that output. That’s what makes it “agentic.”Ronit: So generative AI shows us things—words, images, videos. Agentic AI acts on that output. Where does that apply in finance or the broader economy?Prag: In many organizations, especially large financial institutions, consuming information is just one part of the work. Language models can summarize and extract information for humans to review. But acting on that information still requires human input.Agentic AI goes a step further. It doesn’t just inform the user—it can execute the next step. That opens new types of use cases and opportunities for efficiency gains. Specifically, in addition to automating specific tasks, agentic AI is now enabling organizations to automate some end-to-end processes in their entirety.

<ul><li>From Content to Action: Agentic AI represents a significant evolution from generative AI. While generative AI creates content (text, images), agentic AI takes the next step by autonomously acting on that information to execute tasks and complete end-to-end processes.</li><li>Rethinking Safety and Control: Because agentic AI systems can operate independently and may not follow predictable paths, traditional quality assurance methods are insufficient. Safety must be integrated from the design phase by building in guardrails, simulating potential failure modes, and defining clear escalation paths.</li><li>Value Beyond Efficiency: The true impact of agentic AI extends beyond speed and cost savings. Its core value lies in enhancing decision-making by simulating complex scenarios, exploring alternatives, and surfacing new possibilities at a scale humans cannot match.</li></ul>

You're not just triggering a task—you’re enabling systems to complete processes independently, which may not follow a predictable path.

How should organizations think about safety and control?Ronit: If these systems are acting on our behalf, how do we manage safety and oversight?Prag: It starts at design time. You need to build in guardrails, constraints, and interpretability from the beginning. You're not just triggering a task—you’re enabling systems to complete processes independently, which may not follow a predictable path. These systems are often non-deterministic. The same input won’t always lead to the same output, so traditional QA methods don’t apply.Ronit: You can’t test the same input and expect the same result.Prag: Exactly. Instead, we simulate. We anticipate failure modes. We define escalation paths. Resilience comes from planning for what might go wrong—not just confirming what works.&nbsp; &nbsp;What role does intent play in how these systems function?Ronit: You often mention prompt engineering. Can you explain what it means?Prag: These systems rely on how we define objectives. If the task is vague—if we don’t specify what success or failure looks like—the system might optimize in unintended ways.If you simply say “Do X” it might focus only on that metric, ignoring other important factors. That’s why we need to be deliberate in defining both goals and boundaries. &nbsp;How will agentic AI change how we work with machines?Ronit: We’re not just talking about automation anymore. These systems seem to collaborate and reason.&nbsp;Prag: Yes, they can ask clarifying questions, negotiate trade-offs, and operate across workflows. They’re no longer just tools—they’re part of the process.That changes how we work with them. It’s not only engineers who need to understand AI. We need AI literacy across the business. Everyone should know how to interact with these systems, validate their reasoning, and work alongside them. &nbsp;How should leaders think about impact and value?Ronit: What should leaders expect from agentic AI?Prag: It’s not just about speed or cost. These systems can simulate scenarios, explore alternatives, and test ideas, at a scale humans can’t match.Ronit: So the value is in decision-making, not just efficiency?Prag: Exactly. Some benefits are indirect, like improving judgment or creativity. But we have to measure them intentionally. If we only track time or cost savings, we miss the broader impact.We should ask: Are we making better decisions? Are we surfacing more possibilities? That’s the real value.Ronit: This is clearly a space where we’re just getting started but the questions we ask now will define how we lead later. &nbsp;

AI is crossing a threshold from processing information to executing outcomes. On a recent episode of the Citi Institute podcast, the Institute’s Ronit Ghose spoke with Dr. Prag Sharma, head of Citi’s Artificial Intelligence Center of Excellence, about agentic AI: what it is, how it differs from generative AI, and what leaders need to consider as these systems begin to interpret goals, make decisions, and even collaborate across workflows.

Five Questions Leaders Need to Ask about Agentic AI

<ul><li>A New Era of Dynamism: Japan is decisively moving past its "lost decades" of economic stagnation, driven by rising wages, a shift to positive interest rates, and demographic-driven labor scarcity that is forcing companies to become more dynamic.</li><li>Government &amp; Corporate Alignment: A coordinated, multipronged government strategy is successfully encouraging a shift from savings to investment, strengthening corporate governance, and promoting foreign investment, creating a fertile ground for growth.</li><li>Pivotal Global Player: Japan is solidifying its role as a key, stabilizing force in the Asia-Pacific, balancing relationships with the U.S. and China, while pragmatically navigating global megatrends and demographic shifts.</li></ul>

<h2>What changes are you observing in Japan's economic landscape?</h2>Japan’s transformation has been long in the making. For much of the past three decades, the country has grappled with rebuilding balance sheets, near-zero inflation and interest rates, and an aging population. These factors contributed to a prolonged period of economic malaise, often referred to as the "lost decades". A narrative of lack of opportunity in Japan became entrenched.Now, change is afoot. Factors that had been moving below ground for several years have broken surface and become strikingly visible and dynamic. While aggressive monetary easing began back in 2013 as part of Abenomics, the shift to positive interest rates finally happened in March 2024 and now looks to continue to rise as inflation becomes sustainable. This shift has been partly driven by rising wages, which in turn is underpinned by demographic-driven labor scarcity.But the real change concerns Japanese companies. Long used to a more stable world, corporates are waking up to the confluence of new pressures and are being forced to act with a dynamism not seen for decades. These pressures include labor scarcity and government initiatives focused on corporate governance and returns to asset holders.Another key consideration for companies is the increased geopolitical uncertainty over Japan’s relationship with China, its largest trading partner, and the U.S., its second largest trading partner on whom it relies for defense. Smaller companies have started to see a reduction of pandemic era government loan support while labor is becoming more costly and interest rates and inflation are rising. There will increasingly be a shaking out of marginally productive “zombie” companies.All of this adds up to catalyzing change. And we are likely at an early stage. M&amp;A activity in Japan, already high last year, is at a historic pace for the first half of 2025, despite geopolitical events. Still, nearly 40% of Japanese listed companies continue to trade below book value[1]. On average, companies are cash rich and have underutilized balance sheets. Labor fluidity is increasing and starting to force the dismantling of rigid systems of seniority-based promotion and better resource allocation. There is more change to come.

What happens here is worth paying attention to, not just for the dynamism that is finally returning, but as an example of how a large, developed country attempts to pragmatically navigate the megatrends of a changing world.

<h2>What is the government's role in reinvigorating the economy?</h2>The government has been pursuing a multipronged approach to invigorating the economy. While the Bank of Japan has focused on avoiding deflation, the government has been encouraging a shift from savings to investment and ensuring robustness of returns to asset owners.Government initiatives range from the expansion of tax beneficial investment accounts for individuals, to measures strengthening corporate governance, a more balanced stance on shareholder activism, encouraging the development of the asset management industry, and a lowering of frictions for takeovers and foreign participation.Many of these initiatives have been years in the making but some significant measures are recent, and a critical mass of momentum has formed. We see this, for example, in the dramatic increase in individual investment accounts since the launch of the NISA investment program in 2024; the increased presence of foreign funds in Japan looking to capitalize on a fertile private equity landscape; and the behavioral shift of CEOs engaging more actively with investors and increasingly incorporating return on invested capital (ROIC) in key metrics.Japan's leaders and institutions are aligned and well-coordinated on policies and synchronized when encountering new situations. This will be particularly important as the country transitions to the next stage, where its capital markets start to move away from domination by the Bank of Japan (BoJ) to one that relies on the private sector to channel savings to investment. The BoJ has intervened in an extraordinary fashion over the last decade and now owns around 50% of Japanese government bonds (JGBs). The ride to normalization will inevitably be bumpy, and coordination will be key to mitigate risks and maintain momentum. &nbsp;What is Japan’s place regionally and globally, more broadly?Japan's strategic location, economic size, and strong trade relationships position it as a key player in the Asia-Pacific region. It is the U.S.’s most important strategic partner in the Indo-Pacific. On trade and technology, it plays a balancing role between China and the US, while on key technologies it is a trusted partner to the US.As multilateralism retreats, it is a stabilizing pro-trade voice and promoter of trade norms. Japan’s companies and banks have built a formidable global presence, and the country is the third largest source of outward FDI globally behind the US and China.[2] They are not only exporters and importers but carriers of industrial know-how, trade discipline, and financial stability. Built over decades and ranging from advanced manufacturing, infrastructure and energy, pharmaceuticals, and biotech to automobiles, trading and logistics, and financing, many are global leaders and essential nodes in the global economic web, spanning both developed and emerging markets.Japan is also on the forefront of needing to adjust to demographic challenges and is responding in multiple ways including another important change - immigration, which in coordination with other economic objectives, has increased substantially over the last few years.Japan tends to prioritize consistency, resilience, and pragmatism - traits perhaps valuable in an uncertain world. What happens here is worth paying attention to, not just for the dynamism that is finally returning, but as an example of how a large, developed country attempts to pragmatically navigate the megatrends of a changing world. &nbsp;[1] Verdad, <a href="https://verdadcap.com/archive/unlocking-shareholder-value-in-japanese-balance-sheets#:~:text=But%20almost%20two%20years%20after%20the%20directive%2C%20over,than%20most%20of%20these%20companies%E2%80%99%20management%20teams%20understand.">Unlocking Shareholder Value in Japanese Balance Sheets</a>, March 2025[2] World Population Review, <a href="https://worldpopulationreview.com/country-rankings/fdi-by-country">Foreign Direct Investment (FDI) by Country 2025</a>

Japan, long plagued by economic and demographic challenges, is undergoing an eye-catching transformation. To explain these developments, Citi Institute recently spoke to Robert Nakamura, Citi’s Country Officer and Head of Banking for Japan.&nbsp;

Dynamism Returns After Lost Decades - Japan’s Transformation

<ul><li>AI is the dominant force driving growth, investment, and deals across the Technology, Media, and Telecommunications (TMT) sector.</li><li>Massive AI investment, led by large tech "hyperscalers," relies on co-investments and complex financing for essential infrastructure like data centers.</li><li>Geopolitics, cybersecurity, and inconsistent regulations are the primary risks and potential headwinds facing TMT deal-making and financing. &nbsp;</li></ul>

<h4>What sectors are currently dominating TMT deals, and what are you seeing on the ground from your clients?</h4>AI, of course, is central. You would be hard-pressed to find a company in the sector where AI is not part of the narrative. While there is a focus on efficiency, structural and transformational changes are also driving interest in AI. The investment pouring into developing large language models (LLMs) and the necessary infrastructure like data centers and fiber-optic connection is substantial - unequalled, in my experience. It's clearly a dominant force.But AI is not the only driving force. Digitalization across almost everything - from media and entertainment, advertising, and new product and service creation, to gaming, betting, and sports content sharing - it’s all going digital, globally. And then, managing the significant volumes of data generated by all this has brought cyber-security to the forefront, which is paramount for both traditional and digital businesses.Tech, in general, is really taking the lion's share of growth, though media and telecom are also growing, albeit at a slower pace.

Human creativity works for both good and bad, so strong cyber safety networks are increasingly vital

<h2>What is driving investment in AI at the moment?</h2>The vast majority of AI investments - probably about 80% - is driven by large tech companies, known as the “hyperscalers”. Geographically, the US is dominant, representing about 80% of AI deals today. This is only going to expand.The hyperscalers are investing heavily in building the necessary infrastructure, but they can't grow fast enough on their own. As a result, you’re seeing a lot of co-investments with third parties, such as private equity firms and infrastructure funds. This ranges from financing a single data center to portfolios of companies. Single financings often start as traditional project finance with club loans, and then, once the assets reach a break-even point, they’re refinanced in the public markets at better rates.More interestingly for portfolios, companies are raising what they call warehouse facilities. These serve to fund the equity into a subsidiary (known as a Devco) which holds data centers at different stages of maturity, targeting the high-risk development phase. Project debt is raised on top of these warehouse facilities. This funding helps finance the Devco assets. Once the assets are stabilized (i.e. established, revenue-generating assets) and buyers lined up - often investors seeking stable, yield focused returns - they are switched into a StableCo and the debt is refinanced through public markets using asset-backed securities and the like.Sustainability is also a key factor. Data centers, especially, require a lot of water, electricity, and land, and investors are painfully aware of this. ESG-related ratings, covenants, and goals are increasingly scrutinized.<h4>Beyond the hyperscalers, are we seeing a trend towards consolidation among smaller companies?</h4>Yes, we are. As soon as a start-up with a great idea emerges, there may be several interested buyers. Many new approaches include software-as-a-service (SaaS) and AI-driven applications. Valuations are often high, and based on future growth expectations which may or may not materialize. However, there is a lot of capital chasing credible assets to build wider platforms and fund them to the next stage.<h2>What risks are you seeing when it comes to TMT deals?</h2>Geopolitics are an obvious risk, as are regulatory environments that are not consistent globally. The U.S., Europe, and China, for example, all have different approaches, and you may, dependent on the geographical scope of the transaction, need to comply with all jurisdictions. There’s also the concern about data leaving a country and not being managed in a safe environment. This influences the choice of investment locations - acquisition targets are often not necessarily the most resource-efficient ones, due to geopolitical and regulatory constraints.When it comes to cyber-security risks, there’s a need for solutions. Telecom operators are hiring cyber teams or buying companies to complement their existing capabilities. Companies are developing state-of-the-art new ways to counter the increasing sophistication of malicious actors using AI. Human creativity works for both good and bad, so strong cyber safety networks are increasingly vital.<h2>Is AI important when it comes to financing and M&amp;A activity?</h2>One hundred percent. A company tapping the markets without mentioning AI will probably find it hard to gain attention. We're seeing a clear impact on valuations for AI-driven assets. However, the narrative has to be credible and real, not just a story. Clarity on potential use cases is becoming more important. Capital is flowing towards AI on both debt and equity markets because the expected benefits - economies of scale, scope, efficiencies, and transformative abilities for business models - are potentially immense.<h4>Looking ahead 12-18 months, what headwinds do you foresee in deal-making and financing?</h4>Geopolitics is probably the biggest one. Derailing inflation, interest rate outlooks, shifts in the US dollar's role as a reserve currency, and geopolitical conflicts could all be potential destabilizing factors.Another headwind is that we're still in the very early stages of investment for AI and digital infrastructure. Any hurdles in any of these models could spill over and impact others.Innovation brings the risk of obsolescence and massive friction that can reinvent business models. Those of us who remember the internet boom of the 1990s can recall the many phenomenal-sounding valuations and business models that never materialized. What makes you most excited about the next 12-18 months in this space?This sector is as vibrant as it gets; I can’t think of a better one to be in right now. It is extraordinary what’s happening daily: new developments and new utilizations of AI by clients. It's an amazing time to be involved.

Citi Institute recently sat down with Erik Arveschoug, Global Head of Technology, Media, and Telecommunications (TMT), Corporate Bank, at Citi, to take the pulse of the rapidly evolving TMT sector. We touched on the latest trends, the impact of artificial intelligence (AI), and what the next 12-18 months may bring.

The Future is Now - AI Deals Dominate TMT Sector

In April, a major UK retailer was hit by a cyber attack linked to the Scattered Spider group, part of a broader wave of high-impact intrusions1. The consequences were far-reaching: online ordering was suspended for more than six weeks, contactless payments were disrupted, and supply chains were thrown into disarray. The estimated cost? Nearly $400 million in lost operating profit, months of disruption to customers, and the departure of the firm’s chief digital and technology officer.That level of impact is no longer theoretical. It’s happening in real time to global brands across every sector. In a digital economy, cyber resilience can no longer be siloed in IT and must be treated as a board-level business imperative.We spoke with Bill Hoffman, Citi’s Head of Cyber Risk and Compliance, about how the threat landscape is evolving and what leadership teams need to be doing now.&nbsp;<h2>How has the cyber risk landscape evolved and what should leaders understand about today’s threat environment?</h2>The pace and boldness of today’s threats are unlike anything we’ve seen. Earlier this year, a nation-state group stole more than $1 billion in Ethereum tokens from a cryptocurrency exchange2. &nbsp;The group responsible for the UK retailer breach even gave an interview to the BBC3 and complained that another target wasn’t meeting their extortion demands.The actors aren’t new—criminal groups, geopolitical players, hacktivists, insiders—but their capabilities, velocity, and audacity have all increased. And it’s playing out against a backdrop of growing digital interdependence. The more connected we are—within firms and across industries—the more a single weak point can escalate into a full-blown business, or even sector-wide, disruption.

Cyber risk is no longer just about prevention. Leadership needs to think in terms of resilience: it’s not a question of will an incident happen, but how can we minimize disruption when it does? It’s about bending without breaking. 

<h2>What are some blind spots CEOs, CFOs, or boards often overlook when it comes to cyber resilience?</h2>One of the biggest examples is treating cyber as a technology problem. It’s not. Cyber is a cross-cutting business risk and managing it requires engagement from every level of the enterprise, not just IT.A good resilience strategy requires an understanding of what’s most valuable to the business. That could be sensitive data, financial assets or something else. The key is to build your resilience plan according to your business priorities. That’s why business, technology, and cyber teams need to collaborate. Leadership should be asking: How does cyber risk impact our strategic objectives? And have we defined what an “acceptable” level of risk looks like across the enterprise?<h2>What signals should leadership watch for to assess whether their organization is truly resilient?</h2>Resilience starts with culture and basic security hygiene. People, not tools, are the biggest differentiator. You can invest in the latest technology, but if your help desk can be tricked into resetting a password for an imposter the firm will remain vulnerable.Strong cyber hygiene is one of the best indicators of a resilient culture. That includes how teams handle passwords, email protocols, policy enforcement, which are foundational behaviors. In high-performing organizations, they aren’t just rules—they’re habits.&nbsp;At the same time, security teams have a responsibility to understand the business and its strategy, and to ensure that security capabilities first and foremost enable the business’s objectives.<h2>What does a strong resilience plan look like—and how should companies stress-test it?</h2>A strong plan goes well beyond system restoration. The CEO shouldn’t be drafting their first public statement during a breach. Just like an earnings call or regulatory event, a cyber incident demands a rehearsed, coordinated response.Exercises should be grounded in severe but plausible scenarios that reflect your business model, industry, and threat environment. And they should test not just your technical response, but also the role of business leaders and executives. That should include the challenge of making consequential decisions with incomplete or changing information. Leaders are used to making decisions based on comprehensive analysis, but that is not always possible during a rapidly evolving cyber incident. An exercise is a safe place for leaders to get comfortable with being outside of their comfort zone.This is where culture comes in again. A good exercise reveals weak spots. That’s a win. But it may require a culture shift to recognize that gaps discovered during an exercise are a good thing. We should celebrate the opportunity to address them in advance of a real event.&nbsp;<h2>How is AI changing the cyber defense conversation?</h2>AI is a game-changer on both sides of the equation. It lowers the barrier for attackers while strengthening the toolkit for defenders. Threat actors are using AI for more personalized and convincing social engineering attacks that are harder to detect. They are leveraging AI to craft language for more effective lures in social engineering attacks, such as phishing, and to enable more sophisticated voice or video mimicry using deepfake technology.But on the defense side, AI helps us detect anomalies faster, prioritize threats more intelligently, and uncover hidden patterns. For example, AI can be used to parse large data sets to find patterns that indicate a potential attack and can work alongside security personnel to increase the efficacy of their detection and response capabilities. This includes highlighting anomalies that should be analyzed with greater urgency or surfacing the playbook for a particular type of cyber incident on the screen in real time.The net impact is that AI raises both the stakes and the potential. Organizations that proactively embrace AI—while managing its risks—will be far better positioned for today’s digital landscape. &nbsp;[1]<a href="https://www.bbc.com/news/articles/c0el31nqnpvo" target="_blank">https://www.bbc.com/news/articles/c0el31nqnpvo</a><a href="https://www.nytimes.com/2025/05/21/business/marks-spencer-cyberattack.html" target="_blank">https://www.nytimes.com/2025/05/21/business/marks-spencer-cyberattack.html</a><a href="https://www.reuters.com/business/media-telecom/ms-digital-chief-exits-months-after-damaging-hack-2025-09-11/" target="_blank">https://www.reuters.com/business/media-telecom/ms-digital-chief-exits-months-after-damaging-hack-2025-09-11/</a>[2]<a href="https://fortune.com/crypto/2025/03/04/north-korea-bybit-hack-ethereum-safe-dprk-lazarus-group-tradertraitor" target="_blank">https://fortune.com/crypto/2025/03/04/north-korea-bybit-hack-ethereum-safe-dprk-lazarus-group-tradertraitor</a>[3]<a href="https://www.bbc.co.uk/news/articles/cgr5nen5gxyo" target="_blank">M&amp;S and Co-Op: BBC reporter on talking to the hackers - BBC News</a>

In April, a major UK retailer was hit by a cyber attack linked to the Scattered Spider group, part of a broader wave of high-impact intrusions . The consequences were far-reaching: online ordering was suspended for more than six weeks, contactless payments were disrupted, and supply chains were thrown into disarray. The estimated cost? Nearly $400 million in lost operating profit, months of disruption to customers, and the departure of the firm’s chief digital and technology officer. &nbsp;

Cyber Risk Is Business Risk: Why Resilience Is a Team Sport

<ul><li>India's economy rapidly became the world's fifth-largest, driven by stable governance, a young workforce, digital payments, and vibrant capital markets supporting a booming startup ecosystem.</li><li>India's unique open digital architecture, with 97% of payments now digital, has dramatically lowered business costs and spurred fintech innovation. </li><li>India is proactively addressing global economic headwinds, including high trade tariffs, through domestic tax relief and strategic bilateral trade agreements.&nbsp;</li></ul>

<h5>From your perspective, what are the fundamental drivers behind India’s economic growth?</h5>I see four broad pillars supporting this strong growth. First is a stable government that provides consistency in policy and a clear direction of travel. This stability, combined with a business-friendly and reform-focused agenda, makes India very appealing to global investors.Second, India is a very young country, with an average age of around 26 or 27. This demographic is driving a massive consumption market, which accounts for about 60% of our GDP2. This internal consumption story remains strong regardless of what’s happening elsewhere in the world.&nbsp;Third is the digital payments infrastructure created over a decade ago. This "rail" has been a game-changer, enabling immense financial intermediation and creating economic velocity.Finally, our capital markets are incredibly vibrant with a market cap of nearly $5 trillion3&nbsp; and 100-120 new companies listing every year. The country is also among the five largest startup ecosystems in the world4, creating a lot of economic energy.

Unlike many countries with closed or proprietary systems, India created an open digital architecture that encourages participation and innovation at every level.

<h5>You mentioned digital transformation. How is India’s unique approach to its digital infrastructure reshaping the country and the banking sector?</h5>Unlike many countries with closed or proprietary systems, India created an open digital architecture that encourages participation and innovation at every level. The government built the foundational infrastructure, and private enterprises were invited to innovate on top of it. This has substantially reduced the cost of doing business.The results are staggering. Today, 97% of payments in India are digital5. Compare that to the U.S., where 60% of payments are still physical checks. This digital backbone has fueled the growth of fintech companies, which, combined with available credit data, has made credit more accessible and boosted consumer spending.&nbsp;<h5>What key policy and structural reforms is India undertaking to attract and sustain investment?</h5>Manufacturing is a huge focus. Historically a services-led economy, the government is now determined to build a robust manufacturing ecosystem to create jobs for the one million people entering the workforce every month. As more countries pursue a "China plus one" manufacturing strategy, India is set to be a big beneficiary.Another area is attracting global capability centers (GCCs). India is already home to about 1,700 of the 3,200 GCCs globally6, and these aren’t just back-office operations anymore. They are high-tech hubs for top-end research and development (R&amp;D) and artificial intelligence. For example, the entire global R&amp;D for Mercedes-Benz’s future cars is done in Pune.These reforms are all tied to the government’s goal of making India a developed nation by 2047, its 100th year of independence, with a projected GDP of $25-27 trillion.&nbsp;<h5>How can a global bank like Citi help channel the inflow of foreign capital needed to meet India’s investment goals?</h5>The government’s substantial investment plan is unlikely to be covered by domestic savings, and will require an influx of foreign capital. International banks like Citi can play a meaningful role in mediating this capital, whether it is foreign direct investment into manufacturing or portfolio investments into financial markets.&nbsp;<h5>The global economy is facing headwinds, including trade tariffs. How is India navigating these challenges?</h5>It’s true, India has one of the highest tariff rates on a weighted average basis of around 42-43%. This is a potential curveball, as it can make our exports uncompetitive. The government is acutely aware of this and is managing it in two ways.First, it is providing domestic relief, such as reducing consumption taxes to offset the negative impact on small and medium manufacturers. Second, and more strategically, it is signing a series of bilateral trade agreements with other countries and blocs, including the UK, Australia, and the European Union. This helps companies divert exports to markets where they can find new opportunities if the U.S. market becomes difficult. There is also work happening in the background on a new bilateral trade agreement with the U.S.&nbsp;<h5>As a foreign bank, what is it like navigating India’s regulatory landscape? Is it a roadblock?</h5>Frankly, no. From a regulatory perspective, we are treated exactly like a locally incorporated subsidiary. In fact, because of our size and market share, we are considered a “systemically important financial institution”.&nbsp; Furthermore, the digital adoption in the country means there’s no longer a need for a massive physical footprint – &nbsp;a powerful presence requires no more than a few branches in key economic centers and a good &nbsp;digital ecosystem. Foreign banks can’t just show up and expect to succeed. India is not a “one size fits all” market. You have to invest deeply, understand the nuances, and tailor your products.&nbsp;<hr>1<a href="https://www.imf.org/external/datamapper/NGDPD@WEO/OEMDC/ADVEC/WEOWORLD" target="_blank">https://www.imf.org/external/datamapper/NGDPD@WEO/OEMDC/ADVEC/WEOWORLD</a>&nbsp; 2<a href="https://www.theglobaleconomy.com/India/consumption_GDP/" target="_blank">https://www.theglobaleconomy.com/India/consumption_GDP/</a>&nbsp; 3<a href="https://www.bseindia.com/markets/equity/EQReports/allindiamktcap.aspx" target="_blank">https://www.bseindia.com/markets/equity/EQReports/allindiamktcap.aspx</a>&nbsp; 4<a href="https://www.startupblink.com/blog/top-countries-by-total-startup-output/" target="_blank">https://www.startupblink.com/blog/top-countries-by-total-startup-output/</a>&nbsp; 5<a href="https://www.rbi.org.in/Scripts/PublicationsView.aspx?id=23436" target="_blank">https://www.rbi.org.in/Scripts/PublicationsView.aspx?id=23436</a>&nbsp; 6<a href="https://www.indiatodayne.in/opinion/story/the-rise-of-global-capability-centers-gccs-in-india-a-2025-phenomenon-1222209-2025-05-31" target="_blank">https://www.indiatodayne.in/opinion/story/the-rise-of-global-capability-centers-gccs-in-india-a-2025-phenomenon</a>&nbsp;

India has risen from the 13th largest economy by GDP in 2000 to fifth in 2025, with the International Monetary Fund estimating that it will overtake Japan in fourth place next year1. But what are the real engines driving this economic powerhouse? Citi Institute recently sat down with K. Balasubramanian, Citi’s India Country Officer and Head of Banking for the Indian sub-continent, for an insider’s perspective on the four pillars of India’s growth, its digital revolution, and how the country is navigating global challenges.

The Rise and Rise of India - Growth Driven by Digitization

<ul><li>Asia is transforming from a "Made in Asia" model to a "Designed and Innovated in Asia" hub, driven by a growing middle-class, entrepreneurial activity and technological advancement</li><li>The region is seeing significant market achievements, including corporate governance reforms in Japan, high-tech leadership in China and Taiwan and a booming IPO market in India</li><li>Despite challenges like trade tariffs and the impact of AI on employment, Asian governments are proactively fostering high-tech economies to compete in the new global paradigm</li></ul>

<h2>There’s a lot of buzz about Asia’s growth. What are the main drivers behind this transformation?</h2>It’s a multi-faceted story. First, the sheer scale of growth is staggering. Asia is set to outgrow the rest of the world, not least because 80% of the next billion middle-class consumers will be in this region1. This creates a massive internal market that is attracting multinational corporations from across the globe. This demographic shift, coupled with a surge in entrepreneurial activity, is fundamentally altering the global economic structure.But the more profound shift is in the nature of this growth. We’re moving from a “Made in Asia” to a “Designed and Innovated in Asia” model. The region has become a hotbed of entrepreneurialism and technological advancement. This is reflected in the fact that about 40% of the Fortune Global 500 (the world’s largest companies by revenue) are based in Asia2.

The consensus [in Asia]  seems to be that [the AI] trend is unstoppable, and the only way to manage it is to embrace it and try to stay ahead of the curve.

<h2>Can you give us some specific stand-out achievements at the market level?</h2>Absolutely. In Japan, we're seeing a wave of corporate governance reforms, including new corporate governance and investors stewardship codes. These reforms have combined to help stimulate M&amp;A activity to a 30-year high in 2025, with announced volumes up 85% year-on-year to $355 billion, according to December data from Dealogic.China is becoming a formidable competitor in high-tech sectors like electric vehicles and alternative energy, and is making significant strides in artificial intelligence. Meanwhile, Taiwan is at the heart of the AI revolution, manufacturing the critical components that power this technology, leading to large trade surplus.India is likely to be one of the world’s most active equity capital markets next year, with IPOs expected to raise between $15-20 billion in 20263.At the same time, Asian corporates are significantly increasing their investment in the U.S. Japanese, South Korean and Taiwanese companies, in particular, have been putting a lot of greenfield money into future-shaping industries such as semiconductors, electric vehicle (EV) battery manufacturing, and AI infrastructure. Recent foreign direct investment (FDI) data backs up the trend: In 2024, the Asia-Pacific region was the second-largest source of new investment in the U.S. with over $1 trillion, influenced by U.S. policies like the CHIPS and Science Act4.&nbsp;&nbsp;<h2>With all this growth, are there any significant headwinds or challenges that could derail this progress?</h2>There are two major challenges to be aware of. The first is the ongoing issue of trade tariffs. While many companies have found ways to mitigate their direct impact through export exclusions and transshipment, the broader effect has been to force a rethink of global supply chains.The second, and perhaps more profound, challenge is the rapid advancement of artificial intelligence. While AI is a huge driver of growth, there's a real risk that it could eliminate the low-end manufacturing jobs that have traditionally been the ladder out of poverty for developing nations. If robots can pluck rubber from trees, what happens to the villagers who used to do that work? It's a question that governments across the region are grappling with.&nbsp;<h2>How are governments in Asia responding to this AI challenge?</h2>The consensus seems to be that this trend is unstoppable, and the only way to manage it is to embrace it and try to stay ahead of the curve. We're seeing this in the pro-innovation policies being pursued in China and India, and in Indonesia's focus on building out its data center infrastructure. The goal is to create more nimble, high-tech economies that can compete in this new paradigm.&nbsp;<h2>What about the “China plus one” strategy that we've heard so much about? Is that still the dominant approach among manufacturers?</h2>The “China plus one”" strategy has evolved into something much more complex. With the proliferation of tariffs, it's no longer just about having one alternative to China; it's more like “China plus 15, 20 or even 30”. Companies are building much more diverse and flexible supply chains to navigate the new realities of global trade. However, it’s important to remember that China will always be a critical part of the equation. It’s not just a major exporter – it’s also a massive end market that no global company can afford to ignore.&nbsp;<h2>What do all these trends—the growth, the innovation, the challenges—mean for global banks and financial institutions?</h2>It means that Asia is an incredibly attractive and dynamic place to be. The region is seeing a wave of new companies emerge and grow at pace. This creates an opportunity for those financial institutions that can get in on the ground floor and support companies as they scale.Of course, it’s also a highly competitive environment, with strong local and regional banks vying for a piece of the pie. And the regulatory landscape is just as complex as in the U.S. or Europe. But for those who can navigate these challenges, the opportunities are huge.&nbsp;<hr>&nbsp;1Brookings Institute, The Unprecedented Expansion of the Global Middle Class, 201, <a href="https://www.brookings.edu/wp-content/uploads/2017/02/global_20170228_global-middle-class.pdf">global_20170228_global-middle-class.pdf</a> &nbsp;2<a href="https://fortune.com/companies/? itm_source=fortune&amp;itm_medium=ranking_tout&amp;itm_campaign=g500">https://fortune.com/companies/? itm_source=fortune&amp;itm_medium=ranking_tout&amp;itm_campaign=g500</a> &nbsp;3<a href="https://www.samco.in/knowledge-center/articles/indias-2026-ipo-outlook-20-billion-pipeline-signals-strong-market-momentum/">https://www.samco.in/knowledge-center/articles/indias-2026-ipo-outlook-20-billion-pipeline-signals-strong-market-momentum/</a> &nbsp;4<a href="https://www.bea.gov/data/intl-trade-investment/direct-investment-country-and-industry">https://www.bea.gov/data/intl-trade-investment/direct-investment-country-and-industry</a>

Asia is rapidly transforming into a hub of innovation, wealth creation and opportunity. Citi Institute recently sat down with Jan Metzger, Co-Head of Japan, Asia North, Australia and Asia South Investment Banking, to discuss the key trends shaping the region and what they mean for global markets.

A Hotbed of Change: Asia’s Shifting Economic Landscape

<ul><li>India could become a leader in applied AI by increasing investment and focus on vertical applications such as healthcare and public services and driving national-level adoption</li><li>The country’s ambition goes beyond adoption and usage to include developing models and investing in data center infrastructure</li><li>There is increasing top-down interest in adopting AI but most organizations remain at an early stage</li></ul>

<h2>What were your key takeaways from the summit?&nbsp;</h2>That India aims to be a leading global player in building and scaling agentic AI ecosystems, with a focus on infrastructure, innovation and impact at national scale. My panel explored how tokenization could help accelerate the adoption of agentic AI systems in payments. What is agentic AI? It is generative AI plus execution. That means not just producing insights or content, but undertaking various tasks on behalf of the user, such as connecting to databases and updating them, drafting and sending emails on your behalf, integrating with downstream systems, and moving beyond isolated tasks to complete end-to-end processing.

The focus now is on capital and infrastructure. Another important development is international collaboration. India is looking to deepen its partnership with France, particularly given France’s strength in foundation models such as Mistral AI."

<h2>India wants to be a leading force in AI. What does this ambition mean in practice?</h2>Prime Minister Narendra Modi attended the summit in person and showcased India’s domestic AI capabilities. There was real energy on the ground, with plenty of entrepreneurs discussing their agentic AI frameworks and applications. The talent base is clearly there. The focus now is on capital and infrastructure. Another important development is international collaboration. India is looking to deepen its partnership with France, particularly given France’s strength in foundation models such as Mistral AI.More broadly, there is a dual-track approach. First, there is a clear drive at the national level to establish partnerships between Indian organizations, such as consultancies and conglomerates, and global foundation model providers to expand their offerings. Second, sustained investment in AI and digital infrastructure is needed to ensure India becomes a major AI ecosystem hub in the coming years. Whether current investment levels are sufficient remains an open question, especially given the gap with the U.S. and China. Some stakeholders think that India must move faster. By increasing investment and focus on vertical applications such as healthcare and public services, and driving national-level adoption, the country could become a leader in applied AI.<h2>You have met a wide range of corporates across Delhi, Mumbai and Bangalore to discuss AI. How are they adopting AI and adapting their business models?</h2>We met over 30 corporates this week, and in total more than 80 individuals across treasury, finance and technology teams in Delhi, Mumbai and Bangalore. The mix was broad, spanning technology, consulting, corporate and commercial banking clients. In terms of use cases, there is a common pattern. Almost everyone wants to use AI, and adoption levels are broadly similar. Most are focused on uses that I would summarize as TEAG-CC (Translate, Extract, Analyze, Generate, Compare and Code). Teams want access to the tools and want to roll them out more widely across their organizations, especially within treasury and finance.There is increasing top-down interest in adopting AI. One treasurer noted that discussion meetings with their CFO on automation and AI have shifted from a quarterly to a weekly basis. That said, most organizations remain at an early stage. Functions such as treasury and finance are still working out how to move beyond basic prompting. &nbsp;What is not happening yet is important. Only one client mentioned that they have actively experimented and moved beyond TEAG-CC, into fully embedded, revenue-generating AI applications. Revenue-linked uses are still limited, and most firms are relying on third-party foundation models, often developed outside India.<h2>Can you name one key takeaway from your week in India?</h2>India wants to be a leading force in AI. There was a strong statement of intent to rank among the top three players in the AI ecosystem by 2047, to coincide with the country’s 100th year of independence. This ambition goes beyond adoption and usage. It includes developing models and investing in data center infrastructure. As the name of the summit suggests, the emphasis is firmly on impact. Given India’s scale, the focus is on deploying agentic AI in a way that benefits the broader population, ensuring inclusion and avoiding digital exclusion. Today, models, data and many applications are largely dominated by the West.At the same time, what struck me equally was the bottom-up momentum. There is no shortage of talent. At an individual level, there are many capable engineers and entrepreneurs who want to build and deploy these models. The real challenge is building or refining the full stack, from hardware inputs and data center capacity to GPU access, data availability and, ultimately, scalable use cases. The enthusiasm is real, the intent is serious and the opportunity may be significant, but it requires coordination across the stack.

The annual AI Impact Summit, which began in 2023 in the UK, was recently held in New Delhi, India. Attended by leading technology firms, banks, policy makers and political leaders (including India’s Prime Minister Narendra Modi and French President Emmanuel Macron), it was the first time the summit took place in the Global South. Citi Institute’s Dr. Prag Sharma was a panel contributor, speaking on agentic AI and its implications for 2026. Ronit Ghose, the Head of Citi Institute’s Future of Finance team, caught up with Prag.&nbsp;

India Doubles Down on AI Push

<ul><li>Quantum computing primarily threatens public-key cryptography especially digital signatures that secure authentication identity and blockchain ownership</li><li>The most immediate risk to blockchains is exposed public keys and operational key infrastructure not the underlying blockchain protocol</li><li>Even if cryptographically relevant quantum machines are years away companies must start preparing now because upgrading blockchains takes time</li><li>“Harvest now, decrypt later” does not threaten retroactive theft of blockchain funds but it affects confidentiality encrypted communication and off-chain data&nbsp;</li></ul>

No longer just theoretical, quantum computers pose important questions for blockchains. In our report,<a href="https://on.citi/Quantum_Threat_pdf" target="_blank">Citi: Quantum Threat - The Trillion-Dollar Security Race Is On,</a> we highlight how rapid advances in hardware, improved post-quantum cryptography (PQC) standards and rising regulatory demands are making quantum preparedness a priority.Ronit Ghose, Head of Citi Institute’s Future of Finance team, recently sat down with Thomas Coratger, Lead of the Post Quantum Team at the Ethereum Foundation, to discuss how quantum could challenge today’s cryptography and where the immediate risks lie.This is the first in a two-part series on quantum risk and opportunities for blockchains. Part two will explore potential solutions, implementation paths and implications for post-quantum security. &nbsp;How do advances in quantum computing currently challenge cryptographic security?Advances in quantum computing primarily challenge the public-key cryptography that underpins authentication, secure communication and identity. Many widely deployed encryption schemes rely on mathematical problems that a sufficiently powerful quantum computer could solve.&nbsp;Public-key encryption protects data in transit, but encrypted traffic captured today could be decrypted in the future once quantum capabilities exist. This “harvest now, decrypt later” dynamic creates long-term exposure for sensitive information with long lifetimes, such as government data, intellectual property, health records and private communications.&nbsp;There are also systemic effects. Many protocols assume keys remain secure for decades and that cryptographic building blocks change slowly. Quantum progress challenges those assumptions, forcing organizations to design for faster algorithm replacement, hybrid deployments and long migration timelines. Systems with hard-coded cryptography, embedded devices or limited upgrade paths are particularly vulnerable as they cannot adapt easily.

Preparing for the quantum era is not only about risk mitigation; it is also an opportunity to modernize core infrastructure and address long-standing scalability and security challenges

<h2>How do blockchains rely on cryptography, particularly digital signature and key management, to secure ownership, transactions and consensus?&nbsp;</h2>At a high level, blockchains use cryptography to replace centralized trust with verifiable mathematical guarantees. Digital signatures, cryptographic hashing and structured key management help secure ownership, authorize transactions and maintain consensus across independent participants.&nbsp;In most blockchains, ownership of assets is defined by control of a private key. An address is derived from a public key (or its hash), and possession of the private key gives the holder the exclusive ability to authorize transfers.When a user transfers assets or interacts with a smart contract, they create a transaction and sign it with their private key. Network participants verify the signature using the public key. This ensures only the legitimate key holder can authorize changes to balances or contract state. Without digital signatures, there would be no reliable way to distinguish valid instructions from malicious ones.&nbsp;<h2>If quantum breaks core cryptographic assumptions, where would the impact be most immediate in blockchain systems, and why?&nbsp;</h2>The immediate impact would be on user keys, because they directly control ownership of assets. If a private key can be derived from a public key, an attacker could sign transactions and transfer funds without changing any protocol rules. This makes user accounts the fastest path from a cryptographic break to visible financial loss.High-value operational keys would be similarly critical. Keys controlling exchanges, custodians or administrative functions concentrate large amounts of value or authority, so a single compromise could have significant systemic effects.&nbsp;Protocol rules themselves would not be immediately broken by a quantum attack. They would continue functioning as designed; the problem is that attackers could produce valid-looking signatures within those rules. Governance mechanisms could also be affected indirectly if the keys controlling them were compromised.&nbsp;<h2>In your view, when are we likely to get a quantum computer capable of breaking current encryptions?</h2>A useful distinction is between quantum advantage (already demonstrated for specialized problems) and cryptographic relevance, meaning the ability to break widely deployed public-key systems such as RSA or elliptic-curve cryptography.Most engineering roadmaps place cryptographic relevance in the early-to-mid 2030s, assuming continued progress in error correction, scaling and manufacturing. Breaking elliptic-curve cryptography would require thousands of stable logical qubits and sustained fault-tolerant operation, far beyond current machines. Most roadmaps estimate quantum systems could break current encryptions in the early-to-mid 2030s.However, timelines remain uncertain for two reasons.First, scaling is now largely an engineering challenge rather that a purely scientific one. Once fault-tolerant error-correction thresholds are reliably achieved, development could accelerate rapidly, potentially following industrial manufacturing-style scaling curves. Second, quantum capability will likely emerge gradually, rather than suddenly. Early machines may only be able to attack a limited number of high-value targets with long runtimes, rather than breaking all encryption overnight.The important point is lead time. Upgrading global digital infrastructure, especially decentralized systems, takes many years. Even if a cryptographically relevant machine is eight to 12 years away, preparation must begin now.<h2>How should one think about ‘harvest now, decrypt later’ risks for blockchains?</h2>In blockchains, “harvest now, decrypt later” (HNDL) mainly affects confidentiality, not ownership. Blockchains are primarily integrity systems built on digital signatures, so recording transactions today does not allow retroactive theft of funds. Where HNDL clearly applies is to encrypted data such as private communications and other sensitive off-chain data. If captured today, this information could be decrypted once quantum capabilities exist.For signatures and user funds, the risk is forward-looking rather than retroactive. Once a cryptographically relevant quantum computer exists, exposed public keys could allow private keys to be derived and new transactions authorized, though past transactions remain unaffected. How do you expect different blockchains to evolve as the quantum era approaches? Are there blind spots the industry assumes are secure?In my opinion, most blockchains will likely evolve toward cryptographic agility rather than a one-time switch. This means introducing ways to upgrade authentication, running classical and post-quantum schemes in parallel and prioritizing protection of high-value keys and infrastructure.&nbsp;A common blind spot is assuming “the protocol will upgrade in time”. For upgrades to succeed, wallets, exchanges, custodians, bridges, hardware devices and users must move together. Systems with hard-coded cryptography or weak upgrade paths may be secure today but difficult to transition safely.Another blind spot is infrastructure outside the base protocol. External systems such as bridges and multi-signature wallets manage large amounts of value with relatively few keys. If these components are not updated along with the main system, they can become weak points.<h2>Does quantum computing also create new opportunities?&nbsp;</h2>Yes. Preparing for the quantum era is not only about risk mitigation; it is also an opportunity to modernize core infrastructure and address long-standing scalability and security challenges. Moving to post-quantum cryptography forces systems to be cryptographically agile. This will help make blockchains more resilient to future breaches, not just quantum ones.The need to handle larger encrypted data efficiently is driving research in signature aggregation and proof-based compression.&nbsp;Moving to quantum-safe cryptography encourages rethinking network design and data handling.This creates an opportunity to make systems simpler and faster, rather than just replacing old technology with new ones. Ideally, this transition will also encourage players to share tools and develop standards.These cryptographic advances, driven by quantum preparedness, could enable new applications such as more secure digital identities, long-term data archives and infrastructure built for decades of security.Stay tuned for part two, where we examine realistic post-quantum migration paths and the road to resilient blockchains.&nbsp;Note: Thomas Coratger spoke in his capacity as lead of the post-quantum team within the Ethereum Foundation’s Protocol group. His views reflect the team’s current research and assessment and do not constitute an official position of the Ethereum Foundation as an organization or a statement on behalf of the Ethereum network.

No longer just theoretical, quantum computers pose important questions for blockchains. In our report, Citi: Quantum Threat - The Trillion-Dollar Security Race Is On, we highlight how rapid advances in hardware, improved post-quantum cryptography (PQC) standards and rising regulatory demands are making quantum preparedness a priority.

Managing The Quantum Threat to Blockchains

<ul><li>Migrating to post-quantum cryptography is a multi-year, layered effort. It requires coordination between protocol, wallet and infrastructure developers</li><li>Much of the preparation comes down to getting everyone ready well before quantum attacks become realistic</li><li>The goal is to strengthen security without making the network slower or more expensive &nbsp;</li></ul>

In our last post, <a href="https://www.citigroup.com/global/insights/managing-the-quantum-threat-to-blockchains">Managing the Quantum Threat to Blockchains,</a> we outlined why quantum computing poses a long term risk to today’s cryptography.&nbsp;Here, Citi Institute’s Ronit Ghose continues the conversation with Thomas Coratger, Lead of the Post Quantum Team at the Ethereum Foundation. They discuss how a practical migration could unfold, what timelines are realistic and how responsibilities might be divided up. &nbsp;&nbsp;How are quantum resilient solutions likely to be implemented, and who is responsible for what?The move to quantum safe cryptography will be a layered, multi year transition.&nbsp;At the protocol level, developers need to provide the foundations that let the network support post quantum options without introducing instability. Their job is to create the rails so everything else can migrate gradually and safely.Wallets and applications will carry much of the user facing work. Most people only interact with the blockchain through a wallet, so this layer must make key updates and new authentication flows simple and understandable.&nbsp;Validators and infrastructure operators – who secure the network’s consensus and often safeguard large value pools – must upgrade their signing systems, hardware and operational processes early on. They tend to have higher security stakes and stricter procedural requirements.And finally, users will eventually need to migrate their accounts and keys. The aim, though, is to make this feel like a normal software update rather than a technical chore.A successful transition depends on all these layers working together: the protocol provides capability, infrastructure keeps things secure, wallets smooth the transition and users complete the loop.&nbsp;

Quantum readiness is now treated as a full scale engineering effort

What is Ethereum already doing to prepare for quantum resilience?Lots of work. Quantum readiness is now treated as a full scale engineering effort. The Ethereum Foundation has a dedicated post quantum team focused on research, migration planning and ecosystem coordination.On the consensus side, a major area of work is making sure the network can handle larger, heavier post quantum signatures without compromising decentralisation.&nbsp;Researchers are also evaluating different post quantum signature options and funding work to strengthen implementation quality and testing frameworks.At the execution layer, new proposals would allow smart contracts to verify post quantum signatures. This means developers could start experimenting with quantum safe authentication before the protocol itself fully transitions.And beyond the technical work, a big focus is ecosystem alignment. &nbsp;Much of the preparation essentially comes down to getting everyone ready well before quantum attacks become realistic.&nbsp;How does quantum resilience influence Ethereum’s evolving architecture?It’s increasingly becoming part of core thinking about the road ahead.A central theme is cryptographic agility – designing the system so it is flexible enough to swap in new cryptography without forcing users or validators to rebuild their digital lives.One example is the push toward account abstraction, which separates a user’s identity from a fixed signature scheme. This could allow people to switch to quantum safe signatures in the future without changing their addresses or moving assets.On the consensus side, proposals are assessed partly on whether they can support heavier crypto without undermining decentralisation. Anything that adds burden to validators is examined through a “post quantum readiness” lens.Modularity also plays a role. By keeping execution, consensus and data availability more independent, one layer’s cryptography can be upgraded without re architecting the entire system.And more broadly, long term preparedness should be built in: developing upgrade paths, testing tools and fallback mechanisms now so the network can react calmly even if quantum timelines accelerate.&nbsp;What economic trade offs would come with migrating to post quantum cryptography?There are some unavoidable costs, but they can be managed.The main challenges stem from quantum safe signatures being larger and more intensive from a computational standpoint.&nbsp;Teams are exploring aggregation, specialised verification shortcuts and off chain processing to keep the impact minimal.On the validator side, larger cryptographic objects could increase bandwidth and storage needs. If handled poorly, this could raise barriers to participation. That’s why there’s active work on more efficient proof systems and aggregation techniques to keep hardware requirements modest.But this transition also presents an opportunity: Ethereum could use the move to post-quantum cryptography (PQC) to simplify and modernize parts of its protocol, potentially improving efficiency and decentralization in the long run.The goal is to strengthen security without making the network slower or more expensive—and early preparation makes that possible.&nbsp;How important is cross chain coordination?Coordination is important, but full standardization across chains is unlikely.Where coordination matters most is at the interfaces: bridges, custodians, wallets, and cross chain messaging systems. These components often operate across multiple ecosystems, and mismatched post quantum approaches could create bottlenecks or security gaps.Shared standards for things like signature formats or key management practices would make life easier for developers and auditors and reduce migration friction across the industry.But each blockchain has its own architecture, governance, and performance constraints. They will inevitably make different choices and move at different speeds.A practical approach is to coordinate where interoperability matters and allow more independent evolution where it doesn’t.&nbsp;How long could a realistic migration take?For major blockchains, a five to seven year timeline is realistic—mostly because coordination takes time.The process begins with research, testing, and audits, which can take several years. Then comes a gradual adoption phase, where users, validators and applications migrate at different speeds. In decentralized systems, upgrades can’t be forced. The final phase is consolidation, where the network makes quantum safe options the default and eventually retires older cryptography.It's not the coding that takes longest – it’s moving millions of users and thousands of operators safely and smoothly.What are the main barriers to deploying post quantum cryptography today? Mostly practical ones. Existing blockchains were built around small, efficient elliptic curve signatures, while quantum safe options tend to be bigger and heavier.The biggest obstacles are:<ul style="list-style-type:disc;"><li>larger signature sizes</li><li>slower verification</li><li>more demanding storage and bandwidth requirements</li><li>lack of mature aggregation methods</li><li>the need for careful implementation and audits</li></ul>&nbsp;But research is tackling each of these—through compression, new proof systems, specialised verification tools and high assurance cryptographic libraries. The aim is for the shift to feel seamless for users, with the network handling most of the complexity behind the scenes.

Thomas Coratger spoke in his capacity as lead of the post-quantum team within the Ethereum Foundation’s Protocol group. His views reflect the team’s current research and assessment and do not constitute an official position of the Ethereum Foundation as an organization or a statement on behalf of the Ethereum network.

In our last post, Managing the Quantum Threat to Blockchains, we outlined why quantum computing poses a long term risk to today’s cryptography.&nbsp; Here, Citi Institute’s Ronit Ghose continues the conversation with Thomas Coratger, Lead of the Post Quantum Team at the Ethereum Foundation. They discuss how a practical migration could unfold, what timelines are realistic and how responsibilities might be divided up. &nbsp; &nbsp;

Post Quantum Migration and the Path to Resilient Blockchains

<ul><li data-list-item-id="eae3a9e81c05f20f60fc371f4568f862d">India's "India Stack" and UPI are driving a fintech revolution. This world-class digital infrastructure fosters financial inclusion and scalable business models, cementing India's role as a leader in digital innovation and sustainable economic growth.</li><li data-list-item-id="ea744deea1b8f378300e502e20cf4c758">India's political stability and policy continuity make it a trusted destination for foreign investment. Capitalizing on the "China plus one" trend, the nation is a strategic hub for diversifying supply chains and securing long-term growth.</li><li data-list-item-id="e4b8726ec6a854ec5d2f5b04004200294">India's young, aspirational population is its demographic dividend. This vast talent pool is transforming the nation into a global capability and innovation hub, moving beyond back-office support to lead in AI and technology development.</li></ul>

In an era defined by economic fragmentation, shifting supply chains, and intensifying competition for capital, India is emerging as one of the defining growth stories of the global economy. With a young population, expanding digital infrastructure and ambitions to become a developed economy by 2047, the country is increasingly positioning itself as both a major consumer market and a strategic hub for global investment.Ahead of Citi’s upcoming India Conference, we spoke with K. Balasubramanian, Citi’s Chief Country Officer for India, about the forces driving India’s rise, the role of technology and capital in shaping its future and how Citi is supporting the country’s economic transformation. &nbsp;<h2 style="font-size:20px;line-height:26px;">How is India sustaining its position as the world’s fastest-growing major economy — and why does that matter globally?</h2>India is still a very young country. The average age is around 28 years, and India has a large and expanding middle class, making it a highly consumption-driven economy.Because the population is young, it is also highly aspirational. Per capita GDP has been growing consistently for more than a decade, and when you combine a young population with rising incomes and aspiration, it creates the potential for a huge consumption boom.Technology development in India has also become world class. Today, digital payments have become deeply embedded in everyday life, with UPI accounting for the vast majority of India’s digital payment volume. Platforms created through what we call the India Stack are enabling consumers and corporations to build globally scalable businesses.The government has laid out an ambitious vision of making India a developed nation by 2047, the 100th year of independence. India’s GDP today is a little over $4 trillion, and the expectation is that it could grow to around $30 trillion by that time.To achieve that, India would need to sustain annual growth of around 8–9% over the next two decades. But when you look at the country’s growth trajectory over the last 10 years, which has been around 7%, it does not feel unrealistic. A lot of the building blocks are already in place.

Despite increasing geopolitical fragmentation globally, India has maintained an independent position focused on what is best for the country and its people, rather than aligning too closely with any one power bloc.

<h2 style="font-size:20px;line-height:26px;">Why has India become an increasingly trusted destination for international businesses and investors in a fragmented global environment?</h2>One of the key factors is stability.India has remained the fastest-growing large economy in the world over the last five years, particularly since the pandemic, and a large reason for that is the stability the country offers. We have had policy continuity under the same government since 2014, and that consistency is a critical ingredient for long-term economic development.Despite increasing geopolitical fragmentation globally, India has maintained an independent position focused on what is best for the country and its people, rather than aligning too closely with any one power bloc.That approach has paid rich dividends. Investments are coming into India from the United States, Western Europe, and increasingly from Asian countries including Japan, Korea, and Taiwan.That combination of geopolitical openness, political stability and policy continuity has been compelling for investors. Add to that a population of 1.4 billion people with a young and increasingly consuming middle class, and the long-term opportunity becomes difficult to ignore.<h2 style="font-size:20px;line-height:26px;"> What role will foreign capital and global financial institutions play in India’s next phase of growth?</h2>If India wants to become a developed economy by 2047, the country will require enormous amounts of capital.Domestic savings alone will not be enough to support that level of growth, which means foreign capital will continue to play a critical role.That capital may come through portfolio investments, sovereign wealth funds, or foreign direct investment tied to manufacturing and infrastructure. We are also seeing a significant “China plus one” trend globally, and India is well positioned to benefit because it offers both a large domestic consumption base and an export opportunity.Today, Citi has around 22% market share in multinational banking business entering India and more than 35% market share in foreign institutional investor flows through our custody and securities services business.We have also helped companies raise capital publicly and privately, including many of the country’s largest IPOs.So, despite the fact that we are an international bank in India, we see our goals as very aligned with India’s broader development goals, helping bring capital into the country and helping Indian companies connect with the rest of the world.<h2>How has India’s digital public infrastructure reshaped the economy?</h2>When the current government came into power in 2014, one of its priorities was creating an economic framework that could benefit the entire population of 1.4 billion people.That led to the creation of what we call the India Stack. At its core is the JAM trilogy — Jan Dhan bank accounts, Aadhaar digital identity, and mobile internet connectivity.Together, those systems connected the population into a single digital ecosystem, giving the government the ability to transfer benefits directly into people’s bank accounts and significantly reducing inefficiencies in the system. If someone was eligible for support, they received it directly, which helped drive both financial inclusion and consumption growth.The India Stack also created a major opportunity for entrepreneurs and businesses. Companies began building new consumption-driven business models on top of this infrastructure, attracting venture capital and private equity investment before eventually scaling through IPOs.Many of the companies that emerged over the last decade are now valued in the tens of billions of dollars.<h2 style="font-size:20px;line-height:26px;"> How does India’s talent ecosystem strengthen its position within the global economy — and what role does Citi play in that evolution?</h2>People sometimes underestimate the depth of India’s talent pool and its growing role in the global economy.At Citi, for example, we have around 35,000 people working across our shared services and global capability centers in India, supporting operations across roughly 65 locations globally.What is particularly exciting now is how much innovation is increasingly happening from India itself. Around 70% of our colleagues in these centers are already using AI in some form within their workflows, and many of our teams have created patents and intellectual property tied to AI and process efficiency.These centers are no longer just back-end operations. That combination of talent, technology adoption and scale is one of the reasons global companies increasingly see India not just as a market, but as a long-term innovation and capability hub.

Citi Institute Q&A

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India’s Trust-Powered Ascent

Post Quantum Migration and the Path to Resilient Blockchains

Managing The Quantum Threat to Blockchains

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