Citi Tests Tokenisation of Private Funds
(14 February 2024 - United States) Citi has joined forces with Wellington Management and WisdomTree to explore the tokenisation of private markets.
The partners carried out a proof-of-concept on the Avalanche Spruce institutional test Subnet for institutional blockchain deployments.
They found that smart-contract capabilities could deliver new functionality and operational efficiencies, which are currently unavailable with traditional assets. These new functionalities could "enable buy- and sell-side institutions to engage with distributed ledger infrastructure in a low-risk, low barrier-to-entry manner that is consistent with regulations".
With ABN Amro simulating the role of a traditional investor, the PoC tested the tokenisation of a Wellington issued private equity fund by bringing it onto a DLT network. The underlying fund distribution rules were encoded into the smart contract and embedded in the token transferred to hypothetical WisdomTree clients.
Citi says the experiment demonstrated how smart contracts could be used to enable greater automation and potentially create an enhanced compliance and control environment for issuers, distributors, and investors.
As part of the experiment, Citi also evaluated multiple scenarios of transfers using smart contracts relying on simulated identity credentials issued by WisdomTree and using a private fund token as collateral in an automated lending contract with DTCC Digital Assets.
“Smart contracts and blockchain technology can enable enhanced rule-enforcement at an infrastructure-level, allowing data and workflows to travel with the asset. We believe that by testing the tokenization of private assets, we are exploring the feasibility to open-up new operating models and create efficiencies for the broader market,” says Nisha Surendran, emerging solutions lead, Citi Digital Assets.
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