Citi, a major banking institution, has embraced blockchain technology to kickstart the tokenization process within private markets. In a statement, the company revealed its collaboration with Wellington Management and WisdomTree, aiming to conduct a proof of concept on tokenizing private funds.
Citi Utilizes Blockchain to Tokenize Private Equity
As per Bloomberg, the finance sector may see increased adoption of distributed ledger technology following a trial conducted by Citigroup Inc. The test showcased how a blockchain network could tokenize a private equity fund, with Citigroup partnering with WisdomTree and Wellington Management for the proof of concept.
The trial illustrated that tokenized private equity funds could be securely issued and managed for clients within existing banking frameworks.
Citi Utilizes Avalanche Subnet for Tokenization
Citi stated that it utilized the Avalanche Spruce institutional test Subnet to conduct a proof of concept, which uncovered the potential for smart contract capabilities to offer novel functionalities and operational efficiencies.
These advantages are currently unavailable with traditional assets, and the introduction of these new features could enable buy- and sell-side organizations to engage with distributed ledger technology in a compliant, low-risk, and easily accessible manner.
Furthermore, Citi evaluated various transfer scenarios employing smart contracts, which relied on simulated identification credentials provided by WisdomTree.
Additionally, as part of the trial, it leveraged a private fund token as collateral in an automated loan contract involving DTCC Digital Assets (formerly Securrency).
Rise in Blockchain Adoption Among Financial Titans
As blockchain technology expands, financial institutions are increasingly endorsing the latest advancements in digital ledger innovation. Banks commonly integrate blockchain into their formal systems to maintain easily accessible records.
According to DBS Bank, the transparency and security offered by blockchain for transaction recording are significant advantages for the banking sector.
Unlike conventional banking systems, which store transactions in centralized databases, blockchain records transactions across a partially decentralized network.
This decentralized structure reduces the risk of fraud and cyberattacks while making it nearly impossible for a single point of failure to compromise the entire system.
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