Blockchain Adoption: CitiBank Trials Tokenization Of Private Equity Funds On Avalanche

CitiBank, one of the world’s largest banks, has successfully conducted a simulation demonstrating the tokenization of a private equity fund on the Avalanche blockchain network, specifically using Avalanche’s Layer 1 Spruce subnet. 

Interestingly, this development has the potential to accelerate the adoption of distributed ledger technology in the financial industry, particularly on Wall Street.

Blockchain Simulation For Forex Trading On Avalanche 

According to the press release, the simulation was part of Project Guardian, a collaborative initiative between the Monetary Authority of Singapore (MAS) and the financial industry. 

The application is currently in testing and unavailable to clients. It is focused on a Request for Streaming (RFS) application that tested simulated spot FX for the USD/SGD cross. 

However, the information provided by Avalanche Network in its press release suggests that the underlying solution has broader applicability and can be used to trade any currency pair.

One notable aspect of the simulation was the deployment of Evergreens, a component of Citi’s Project Guardian initiative, which leveraged Avalanche’s native internetwork interoperability. 

As interoperability gains importance in the blockchain space, the press release states that Avalanche’s Warp Messaging (AWM) emerged as a “compelling network feature” for the bank. Notably, AWM facilitates seamless interoperability without needing third-party bridges or trust assumptions.

President of Ava Labs, John Wu, expressed excitement about leading financial institutions utilizing Avalanche to develop innovative solutions for foreign exchange and broader capital markets. 

Wu emphasized that Avalanche’s speed, scalability, and customizability make it an ideal platform for building on-chain applications that cater to institutional needs.

In an interview, Puneet Singhvi, Managing Director and Head of Digital Assets for CitiBank’s Institutional Clients Group, stated that simulations like this could facilitate financial institutions’ adoption of blockchain technology while adhering to regulatory compliance. 

CitiBank To Offer Tokenization Services For Institutional Clients?

According to a Bloomberg report, Citi plans to evaluate the simulation results to determine whether it should offer services in this area. Decisions are expected in the coming weeks.

This test follows CitiBank’s launch of a digital asset service for institutional clients in September, which converts clients’ deposits into tokens that can be sent worldwide.

During the simulation, CitiBank tokenized and custodied a hypothetical private equity fund issued by Wellington. Blockchain technology provided by Avalanche’s smart contract platform facilitated the encoding of fund distribution rules into the underlying smart contract. 

As a result, the tokens were automatically split and transferred to simulated WisdomTree financial services clients according to the predetermined rules.

Furthermore, the project explored using a private fund token as collateral in an automated lending contract with Depository Trust & Clearing Corp.’s digital assets unit. Puneet Singhvi highlighted the potential of utilizing private fund tokens as collateral in lending contracts, showcasing the broader possibilities enabled by blockchain technology.

Overall, CitiBank’s successful simulation on Avalanche demonstrates the transformative potential of blockchain in the financial industry. 

Featured image from Shutterstock, chart from TradingView.com