Citi completes proof of concept on tokenization of private funds

It found new functionalities that could lower barrier-to-entry, Citi said.

Citi has completed a proof of concept on tokenization of private funds, developed with investment management firm Wellington Management and financial solutions provider WisdomTree.

The proof of concept, which was conducted on the Avalanche Spruce institutional test Subnet, reportedly found that smart-contract capabilities could deliver new functionality and operational efficiencies, Citi said in a press release.

The proof of concept tested the tokenization of a Wellington issued private equity fund by bringing it onto a distributed ledger technology (DLT) network. The underlying fund distribution rules were encoded into the smart contract and embedded in the token transferred to hypothetical WisdomTree clients. 

This 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.

These new functionalities could also 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, according to Citi.

“Private markets, although a $10t asset class, are characterized by an infrastructure that is complex and manual, with a lack of standardization and transparency, leading to inefficient distribution and operations. There are often complex legal and regulatory restrictions related to private assets,” Citi noted in a press release.