Citi has completed a proof of concept with Wellington Management and WisdomTree to provide tokenisation of private funds.
This tested the tokenisation of a private equity fund issued by Wellington, with ABN AMRO fulfilling the role of a traditional investor. The PoC was conducted on the Avalanche Spruce Institutional test Subnet.
The underlying fund distribution rules were coded into the smart contract and embedded into the token that was transferred to firms as hypothetical clients of WisdomTree.
The participants indicate that this tokenisation of the terms of the private fund contract illustrates how smart contracts can be used to extend automation and to deliver an improved compliance and control environment for issuers, distributors and investors.
They suggest that this is an important step forward in delivering standardisation and transparency to a private funds market that has remained heavily manual and complex from an operational standpoint.
In the PoC, Citi evaluated a range of scenarios, employing simulated identity credentials issued by WisdomTree and employing a private fund token as collateral in an automated lending contract with DTCC Digital Assets, the DTCC digital asset arm acquired through its purchase of Securrency in Q4 2023.
Commenting on this initiative, emerging solutions lead for Citi Digital Assets Nisha Surendran says: “Smart contracts and blockchain technology can enable enhanced rule-enforcement at an infrastructure-level, allowing data and workflows to travel with the asset.
“We believe that by testing the tokenisation of private assets, we are exploring the feasibility to open-up new operating models and create efficiencies for the broader market.”
Wellington Management’s director for digital assets and tokenisation strategy Mark Garabedian adds: “The Avalanche Spruce test network has proven to be an ample technical sandbox environment for coming together with partners and exploring the potential of blockchain technology within our industry.
“We look forward to continuing to collaborate with Citi, [as] strong, long-term partners that are providing meaningful developments and thought leadership in the blockchain space.”
Maredith Hannon Sapp, head of business development for digital assets at WisdomTree, says: “We believe blockchain-enabled finance is the future of the industry and this proof of concept showcases the ability to explore the transferability of tokenised funds and related compliance in different markets. This will inform future in-production use cases of how blockchain technology and smart contracts can be used in on-chain transactions.”
