- Citi’s report highlights the transformative potential of DLT and the Avalanche blockchain in tokenising private market assets.
- Through a proof-of-concept they demonstrated how digitising and tokenising assets can address market inefficiencies and introduce new investment opportunities.
- The exploration underscores a promising future where traditional financial systems and crypto technologies merge.
Citigroup has just released a report on how distributed ledger technology (DLT) could transform capital markets by tokenising private market assets with the help of the Avalanche blockchain.
According to the report, Citi is focused on leveraging DLT to revolutionise capital markets by advancing efficiency, digitising investment products for improved distribution and operational processes, and easing the transition of traditional assets to digital forms.
Citi explains that proof of concept may include looking at market efficiencies, to enable new investment opportunities with improved features, allowing interoperability and compliance to streamline the digital shift for all stakeholders.
Proof-of-Concept First
Citi collaborated with Wellington Management, WisdomTree, Ava Labs, and other partners on a proof-of-concept (PoC) to explore digitising and tokenising financial assets, with a specific focus on private funds.
The PoC-team wanted to address the technical, operational, and legal challenges of analogue to digital transformation. A “test token” had been designed to represent a private equity fund without monetary value for focusing on technological as well as operational aspects using the Avalanche Evergreen Subnet “Spruce” with its advanced features.
It indicated how digitisation could be a benefit to a private markets sector known for its inefficiency stemming from a complex and manual infrastructure. All of this has been proven by the PoC in the tokenisation of assets and the use of DLT, with promises like automated operations, faster settlements, and new use cases of tokenised assets like collateral.
Citi’s collaboration with Ava Labs and others shows that efficiency, accessibility, and transparency in the financial ecosystem can be overcome by tokenisation of private funds.
As Citi shows in the report, tradfi and crypto are coming together, working on the future of the financial system, making the next few years an exciting time to be in this space, watching it all unfold. The report then concluded on a positive note saying:
Overall though, our evaluation showed that providing a flexible on-ramp for traditional assets to digital networks for distribution and enabling a compliant and efficient environment for management and servicing of these assets has the potential to transform the way private market assets are held and transacted today.
Citigroup