Financial giant Citi tests tokenization of private equity funds; successful proof of concept

Smart contracts help improve efficiency

On the 14th, Citi, a major US financial company, announced a proof of concept (PoC) regarding the tokenization of private equity funds (hereinafter referred to as PE funds) in cooperation with US investment management company Wellington Management and US asset management company WisdomTree. announced that it was successful.

The proof of concept used Spruce, a subnet of the layer 1 blockchain Avalanche, and found that its smart contract capabilities provide new functionality and operational efficiencies not yet available with traditional assets. Ta.

Spruce is a dedicated network for financial institutions that was launched in April 2023, and allows for customization such as authorized validator sets and unique gas token settings. Wellington Management and WisdomTree have partnered from the beginning to use Spruce as a testnet to measure the effectiveness of on-chain transaction execution and settlement.

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Tokenize private equity funds

Citi's latest proof of concept involves tokenizing a private equity fund issued by Wellington Management. The underlying fund distribution rules were coded and embedded into the token's smart contract, resulting in end-to-end token transfers.

There have also been multiple cases of remittances using smart contracts that rely on mock ID credentials issued by WisdomTree, and the use of private fund tokens as collateral for automatic lending agreements with US clearing and settlement company DTCC Digital Assets. Evaluated.

Nisha Surendran, Head of Emerging Solutions at Citi Digital Assets, said: “Smart contracts and blockchain technology enable stronger rule enforcement at the infrastructure level, allowing data and workflows to move with assets.” pointing out. She expressed her aspirations as follows:

Initiatives to tokenize real assets

Citi said in a statement that private markets are a $10 trillion asset class that lacks standardization and transparency, relies on complex, manual infrastructure, and Criticized that the management was extremely inefficient. He explained that Citi continues to develop innovative digital asset solutions to enhance the diverse range of products and services it offers.

Citi claims that this successful experiment shows that it is possible to issue and store tokenized PE funds in a controlled environment while maintaining compatibility with existing banking systems.

Puneet Singhvi, managing director and head of digital assets at Citi, said in an interview with Bloomberg that the company will evaluate the results of the proof of concept and make a decision in the coming weeks about whether to offer services in this space. He spoke at

Last September, Citi announced the development and testing of a new service called “Citi Token Services” that uses blockchain and smart contracts to tokenize real-world assets (RWA). It is intended to be introduced in deposit management and trade finance, and aims to provide a new digital asset solution for institutions.

Sharmir Khalik, Citi's global head of services, said the development of the service is part of the bank's efforts to “deliver the next generation of real-time, always-on banking to our institutional customers.” Stated.

The latest experiment follows Citi's exploration of ways to use blockchain technology to update its existing infrastructure.

Citigroup estimates that the tokenization market could grow to 720 trillion yen ($5 trillion) by 2030. Meanwhile, Boston Consulting Group estimates that tokenized RWA could become a market worth up to $16 trillion by 2030.

connection:Financial giant Citi develops RWA tokenization solution using blockchain technology

JP Morgan's initiatives

US financial giant JP Morgan Chase (hereinafter referred to as JP Morgan) began operating a blockchain-based collateral settlement system in October last year.

One of BlackRock's money market funds (MMFs), the largest US asset management company, was converted into a digital token and sent to British financial giant Barclays as collateral for OTC derivatives trading. In the future, JPMorgan will expand the ability for customers to use other assets, such as stocks and bonds, as collateral.

It has also been revealed that the bank is also developing a blockchain-based deposit system.

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Furthermore, in November, JPMorgan announced that it would conduct a proof of concept for recruitment and redemption of funds provided by WisdomTree under Project Guardian, a public-private partnership initiative of the Monetary Authority of Singapore (MAS, the central bank). The aim is to experiment with how blockchain, smart contract and tokenization technologies can help automate portfolio management.

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The tokenization of RWA has attracted a lot of attention since last year, and among financial institutions, Swiss financial giant UBS has started an experiment with tokenization of money market funds. Backed Finance, also from Switzerland, has tokenized the U.S. short-term government bond ETF “IB01” provided by BlackRock on Basechain, offering an annual yield of 5.36%.

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