Citi, in alliance with Wellington Management, Wisdomtree, and ABN AMRO, completed a proof of concept for the tokenization of a private fund on top of the Avalanche blockchain. The test used Spruce, an Avalanche subnet, to tokenize the fund and transact the tokenized assets, which were programmed to “automate operations, settle faster, and enable new and composable use cases.”
Citi Completes Private Market Tokenization Test on Avalanche Subnet
Citi, one of the largest financial institutions, has completed a tokenization test for a private market equity fund in alliance with Wellington Management, Wisdomtree, and ABN AMRO, who played different roles during the proof of concept event.
The test’s objective was to “better understand key technological, operational, and legal considerations that are required to kickstart the transition from analog to digital” of these private markets. For this goal, Citi selected Spruce, an institutionally oriented Avalanche subnet, as the platform for tokenizing these assets.
During the test, Wellington Management acted as the private equity fund issuer of the underlying asset, ABN AMRO was enlisted as an investor of the fund, and Wisdomtree simulated the role of a wealth provider, who also managed the onboarding of potential test investors.
The use cases tested included the tokenization of the hypothetical private fund with rules encoded in the smart contract of the token issued, testing transactions relying on externally issued IDs, and using this token as collateral in a parallel lending contract in alliance with DTCC Digital Assets.
Citi concluded that there were some benefits in using tokenization technologies for putting assets into the hands of investors in newer forms with upgraded capabilities outside of what can be achieved with traditional tech.
Furthermore, Citi concluded that the introduction of decentralized ledger technologies (DLT) for these processes “would enable greater automation and the potential for an enhanced compliance and control environment for issuers, distributors, and investors,” stating that tokenization has the potential to “transform the way private market assets are held and transacted today.”
Source : Bitcoin.com / Feb 17, 2024