Citi Bank used Avalanche to explore private equity funds tokenization

Citi Bank, Wellington Management, and WisdomTree explore private equity tokenization on Avalanche.
The Proof of concept demonstrates the potential for enhanced automation, compliance, and control.
Collaboration with DTCC Digital Assets evaluates interoperability and seamless integration.

Citi Bank, in collaboration with Wellington Management and WisdomTree, has ventured into the exploration of private equity funds tokenization using the Avalanche blockchain platform.

This innovative initiative aims to revolutionize capital markets by leveraging blockchain technology to enhance operational efficiencies and explore new operating models.

Avalanche Spruce Subnet

The proof of concept conducted by Citi Bank, Wellington Management, and WisdomTree was facilitated through the Avalanche Spruce institutional test Subnet. This specialized network environment provided an ideal sandbox for testing the tokenization of private funds, offering scalability, efficiency, and regulatory compliance. The Spruce Subnet’s infrastructure enabled seamless experimentation with smart contract capabilities, paving the way for the development of novel functionalities and operational efficiencies not previously attainable with traditional assets.

Private markets, valued at approximately $10 trillion, have long grappled with complex infrastructure, lack of standardization, and transparency issues. The utilization of Avalanche’s Spruce Subnet offers a potential solution to these challenges, providing a secure and efficient platform for tokenizing private equity funds. By encoding underlying fund distribution rules into smart contracts and embedding them within tokens transferred to investors, issuers, and distributors, the proof of concept demonstrated the potential for greater automation, enhanced compliance, and improved control environments.

Enabling seamless integration and interoperability

The experimentation with tokenized private assets also involved collaboration with DTCC Digital Assets, formerly known as Securrency, to evaluate multiple transfer scenarios using smart contracts. This collaboration underscores the importance of seamless integration and interoperability between blockchain-based solutions and existing financial infrastructure. By leveraging simulated identity credentials issued by WisdomTree and utilizing private fund tokens as collateral in automated lending contracts, Citi Bank explored the technical, legal, and operational frameworks necessary for transitioning traditional assets to a digital platform.

The successful completion of the proof of concept marks a significant milestone in the journey towards mainstream adoption of blockchain technology within the financial industry. As Nisha Surendran, Emerging Solutions Lead for Citi Digital Assets, highlighted, smart contracts and blockchain technology have the potential to enable enhanced rule enforcement at an infrastructure level, facilitating seamless data and workflow management. This exploration of tokenized private assets represents a critical step towards unlocking new operating models and creating efficiencies for the broader market.

Mark Garabedian, Director of Digital Assets & Tokenization Strategy at Wellington Management, commended the technical sandbox environment provided by the Avalanche Spruce test network, emphasizing the collaborative efforts between partners to explore blockchain technology’s potential within the industry. Similarly, Maredith Hannon Sapp, Head of Business Development, Digital Assets, at WisdomTree, emphasized the future potential of blockchain-enabled finance and the proof of concept’s role in exploring tokenized fund transferability and compliance across different markets.

Citi Bank’s ongoing commitment to developing digital asset solutions underscores its dedication to innovation and enhancing its products and services across various financial domains. Through collaboration with industry partners and leveraging cutting-edge blockchain technology, Citi continues to pave the way for the future of finance.