Citi Bank, WisdomTree, and Wellington Embrace Avalanche for Tokenization of Private Funds
Citi Bank, in partnership with Wellington Management and WisdomTree, achieved a major milestone on February 14, 2024, by successfully conducting a proof of concept on the tokenization of private funds. This groundbreaking initiative took place on the Avalanche Spruce institutional test Subnet and showcased the potential of smart contracts to revolutionize traditional assets.
The proof of concept focused on tokenizing private funds, a complex and non-standardized asset class worth $10 trillion. Citi Bank collaborated with WisdomTree and Wellington Management to carry out the trial on Avalanche’s Spruce Subnet, demonstrating how smart contracts can introduce new functionalities and operational efficiencies that are currently lacking in traditional assets.
Mark Garabedian, the Director of Digital Assets & Tokenization Strategy at Wellington Management, praised the Avalanche Spruce test network as an excellent technical sandbox environment. Maredith Hannon Sapp, Head of Business Development, Digital Assets, at WisdomTree, also acknowledged the proof of concept’s ability to explore the transferability of tokenized funds and compliance in different markets.
Traditional finance giants, including T. Rowe Price, WisdomTree, Wellington Management, and Cumberland, joined the subnet last April to improve trade execution and settlements, streamlining processes.
Citi Bank conducted a comprehensive evaluation of the technical, legal, and operational frameworks required to transition traditional assets to a digital platform. Smart contracts were utilized to encode fund distribution rules and embed them in tokens transferred to hypothetical WisdomTree clients. This experiment demonstrated how smart contracts can enhance automation, creating a sophisticated compliance and control environment for issuers, distributors, and investors.
Nisha Surendran, Emerging Solutions Lead for Citi Digital Assets, emphasized that smart contracts and blockchain technology enable enhanced rule enforcement at an infrastructure level, allowing data and workflows to travel with the asset.
The proof of concept explored various transfer scenarios using smart contracts and leveraged simulated identity credentials issued by WisdomTree. A private fund token served as collateral in an automated lending contract with DTCC Digital Assets (formerly Securrency).
Tokenizing private funds addresses existing inefficiencies and offers potential benefits such as improved automation and compliance. Citi Bank’s successful proof of concept on the tokenization of private funds using Avalanche’s Spruce Subnet signifies a significant development in the financial industry. Their commitment to exploring the tokenization of private assets represents a step toward integrating traditional finance with digital assets, crypto, and tokens, opening doors for new operating models in the broader market.