Citi Completes Proof of Concept on Tokenization of Private Markets

Citigroup has partnered with Wellington Management and WisdomTree to explore the tokenization of private markets.

The collaboration successfully completed a proof of concept on the Avalanche Spruce institutional test Subnet, demonstrating the potential of smart-contract capabilities to bring new functionality and operational efficiencies, the companies said in a Wednesday (Feb. 14) press release.

Private markets, which represent a $10 trillion asset class, have long been plagued by complex and manual infrastructure, a lack of standardization and limited transparency, according to the release. These factors have resulted in inefficient distribution and operations.

The proof of concept aimed to address these challenges by leveraging blockchain technology and smart contracts, the release said.

The experiment simulated the tokenization of a Wellington issued private equity fund using distributed ledger technology (DLT), per the release. Smart contracts were used to encode the underlying fund distribution rules and embed them in the token transferred to hypothetical WisdomTree clients. This highlighted how smart contracts could enable greater automation and create an enhanced compliance and control environment for issuers, distributors and investors.

Citi also evaluated multiple scenarios of transfers using smart contracts, including using a private fund token as collateral in an automated lending contract with DTCC Digital Assets, according to the release.

This evaluation aimed to assess the technical, legal, and operational frameworks required to bring traditional assets onto a digital platform, the release said. The goal was to support clients in issuing and accessing tokenized private assets in a controlled and scalable manner while ensuring interoperability with the traditional ecosystem.

Citi continues to develop digital asset solutions, leveraging shared technology capabilities and a common strategic approach, per the release. These innovative solutions enhance Citi’s products and services, including digital money, trade, securities, custody, asset servicing and collateral mobility.

In another recent development, Citi said in November that it created an application that uses blockchain to execute foreign exchange (FX) trades. This tool employs blockchain infrastructure to price and perform bilateral spot FX trades.

In September, Citi Treasury and Trade Solutions unveiled a digital asset solution designed to enhance cash management and trade finance capabilities. This solution uses blockchain and smart contracts to provide institutional clients with “always-on” and programmable financial services.