In a groundbreaking move, the renowned American banking giant, Citi, has successfully completed a proof-of-concept (PoC) aimed at tokenizing traditional finance (TradFi) assets using blockchain technology. The multinational investment bank utilized Avalanche’s Evergreen subnet Spruce, citing its features such as multi-level permissioning, EVM compatibility, institutional focus, and customizability.
Citi simulated the process by using a Wellington Management private equity fund as the underlying asset’s issuer, with Dutch bank ABN AMRO playing the role of investor and asset manager Wisdom Tree simulating the wealth management platform. According to Citi, the tokenized fund demonstrated the potential to automate operations, achieve faster settlements, and enable new and composable use cases through the implementation of smart contracts.
The bank emphasized its continuous control over the tokens, utilizing smart contracts to enforce “compliance-by-design.” The report highlighted that blockchain technology unlocked use cases that were previously unfeasible, such as using a private asset fund token as collateral to borrow more liquid asset tokens.
Citi concluded that tokenization offered a “meaningful improvement” to existing financial services and considered it a necessary step for achieving scale. The PoC revealed that blockchain technology provides new use cases and distribution channels while ensuring “always-on compliance” through a fully traceable audit trail.
This move by Citi aligns with a broader trend in the financial sector, as other major institutions are exploring the tokenization of traditional assets. JP Morgan and Apollo completed their own PoC in November 2023, showcasing the tokenization of funds on major blockchains. Société Générale, France’s third-largest bank, also completed a €10 million issuance of green bonds on-chain in December 2023.
Notable financial institutions, including Franklin Templeton, Standard Chartered, and South Korean asset manager Mirae, have also entered the realm of tokenization. According to Dune Analytics, tokenized securities currently boast a market cap exceeding $488 million, underlining the growing significance of blockchain technology in the financial landscape.
Photo by Tom Fisk
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