Citi, Wellington Management, and WisdomTree Complete Tokenization Proof of Concept

​Citi, alongside Wellington Management and WisdomTree, has accomplished a successful proof of concept in tokenizing private funds. The trial, executed on the Avalanche Spruce institutional test Subnet, revealed the potential for smart-contract capabilities to introduce new functionalities and operational efficiencies not presently available with conventional assets.

Private markets, constituting a $10 trillion asset class, suffer from complex and manual infrastructure, lacking standardization and transparency. This leads to inefficient distribution and operations, compounded by intricate legal and regulatory constraints.

In the proof of concept, ABN AMRO simulated a traditional investor's role, testing the tokenization of a Wellington-issued private equity fund on a distributed ledger technology (DLT) network. Smart contracts encoded the underlying fund distribution rules, embedded in tokens transferred to hypothetical WisdomTree clients. This demonstration showcased smart contracts' potential for automation, potentially enhancing compliance and control for issuers, distributors, and investors.

Citi also explored various transfer scenarios using smart contracts, with simulated identity credentials from WisdomTree and private fund tokens as collateral in automated lending contracts with DTCC Digital Assets.

Nisha Surendran, Citi Digital Assets' Emerging Solutions Lead, expressed, "Smart contracts and blockchain technology can enable enhanced rule-enforcement at an infrastructure-level, allowing data and workflows to travel with the asset. We believe that by testing the tokenization of private assets, we are exploring the feasibility to open-up new operating models and create efficiencies for the broader market."

Mark Garabedian, Wellington Management's Director of Digital Assets & Tokenization Strategy, commended the technical sandbox environment provided by the Avalanche Spruce test network, emphasizing Citi's role as a strong, long-term partner in blockchain exploration.

Maredith Hannon Sapp, WisdomTree's Head of Business Development, Digital Assets, noted the proof of concept's significance in exploring blockchain-enabled finance, underscoring its potential in transaction transferability and compliance across markets.