Global bank Citi successfully conducted fund tokenization trials of equity funds, establishing the possible tokenization use cases in the financial services industry.
Global financial services firm Citi helmed equity fund tokenization trials recently and released a detailed report on its results. The trials are causing a significant number of discussions in the crypto community with their immense likely potential. Tokenization use cases have long been under the scanner by the financial services industry worldwide. But the recent trials could establish a firm proof of their viability.
Although blockchain equity funds are not the norm among financial firms currently, they could take off in the near future. In fact, Citi partnered with blockchain firm Ava Labs to conduct the fund tokenization trials. Eventually, they created a proof-of-concept to tokenize private equity funds.
The trials’ report mentioned in detail how the processes occurred. Dutch bank ABN AMRO acted as the investor in one of Wellington Management’s private equity funds. The entire simulated workflow happened on the Avalanche Evergreen Spruce Subnet.
The partners enforced the distribution rules of the fund via smart contracts. On the other hand, Citi described how lending contracts could be automated, while actions on assets were also supported via automatic contracts.
The report said, “The potential benefits range from solving infrastructural issues in traditional operating models to the possibility of new investment product and servicing capabilities enabled by DLT features, such as programmability and composability,” regarding the advantages of such blockchain equity funds.
Although legal and technical issues for the funds remain, Citi said how tokenization use cases could transform private equity markets. But this is not the first time Citi has been bullish on blockchain technology.
In 2023, the company advocated for central bank digital currency pilots across the world. At the same time, it also introduced blockchain services for its clients and users last year.
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