Citigroup and cryptocurrency exchange Coinbase plan to collaborate on digital asset payment solutions for the U.S. bank's institutional clients, to expand the offering to global clients in the future.

The partnership will initially focus on enabling users to deposit and withdraw traditional currencies (commonly referred to as "fiat" in crypto) through Coinbase's services, marking a significant step as it allows smooth transitions between traditional money and digital assets like cryptocurrencies, the two companies said in a joint statement on Monday.

Additionally, the collaboration will streamline payment operations, Citi said.

"By combining their reach with Coinbase's leadership in digital assets, we're creating solutions that can simplify and expand access to digital asset payments," said Brian Foster, global head of Crypto as a Service at Coinbase.

Citi said more details on specific features, including exploring ways to convert traditional currency into stablecoins, will be disclosed in the coming months.

Stablecoins are digital tokens designed to keep a constant value. They are often backed by traditional assets such as the U.S. dollar or government debt.

They have surged in popularity, and their demand is expected to increase further after the U.S. passed its GENIUS Act in July that sets federal rules for stablecoins.

Dealmaking within the digital assets industry has picked up pace this year as a crypto-friendly Trump administration encourages companies to expand their business in the U.S., providing a favorable environment for growth and investment.

Coinbase, one of the world's largest cryptocurrency exchanges, shelled out $375 million to buy investment platform Echo, while earlier this year it had struck a $2.9 billion deal for crypto options provider Deribit.