Citibank Is Exploring The Idea Of Tokenizing Private Equity Funds

(CTN News) – Among the largest Citibank in the U.S. has conducted a simulation in which blockchain was used to tokenize a private equity fund, which could pave the way for greater institutional adoption of blockchain.

It was a partnership between the Citigroup (NYSE: C) and WisdomTree, a New York exchange-traded fund (ETF) firm. Wellington Capital is a Boston-based investment manager with over $1.4 trillion in assets under management.

Citibank developed a hypothetical private equity fund that was tokenized using blockchain technology. By using smart contracts, the banking giant encoded the fund distribution rules, which were then sent to the tokenized fund, directing the token splitting, and automatically transferring the proceeds to hypothetical WisdomTree clients.

In a simulation conducted by Citibank, the bank demonstrated to Puneet Singhvi, the bank’s head of digital assets, that asset managers can tokenize their funds on the blockchain in a controlled environment. In addition, tokenized funds were shown to be legally compliant and compatible with existing banking systems, enabling legacy institutions to implement the technology seamlessly.

Additionally, the three companies explored the possibility of using private fund tokens as collateral in an automated lending agreement. In addition to Singhvi, the digital assets unit at the Depository Trust & Clearing Corporation participated in the simulation, which Singhvi reports produced positive results.

In the coming weeks, Citibank, the third-largest lender in the country,

Will continue to evaluate the test results in order to determine whether it should begin offering related products and services.

Nisha Surendran, who serves as the leader of Citibank digital asset unit’s emerging solutions team, believes that blockchain can assist in increasing the efficiency of the $6 trillion private equity market.

Through the test of tokenizing private assets, we have examined the feasibility of opening up new operating models and creating efficiencies for the broader market”.

According to Citibank, it continues to lead the American banking industry in exploring blockchain solutions. In September of last year, the bank became the first digital custodian for BondbloX, the world’s pioneer fractional bond exchange, which allows investments starting at $1,000.

Furthermore, the bank has partnered with SWIFT and other top banks to launch a blockchain interoperability pilot study that aims to unlock tokenization within the banking sector.

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