Citi pilots tokenization of private assets using Avalanche infrastructure

Citi, in collaboration with Wellington Management and WisdomTree, has tested the tokenization of private assets using Avalanche Spruce, an Evergreen subnet designed for institutional blockchain deployments, according to an announcement post from Avalanche.

Less than a year ago, Ava Labs launched Avalanche Spruce, an Evergreen Subnet purpose-built for buy- and sell-side institutions to measure the benefits of on-chain finance.

Today marks a major update to these efforts as @Citi and DTCC Digital Assets join the network and test the… pic.twitter.com/sX96rNPK9i

— Avalanche 🔺 (@avax) February 14, 2024

The pilot aims to measure the feasibility of private market tokenization through three key use cases, including the end-to-end transfer of tokenized assets, secondary trading, and applying these digital assets as collateral in lending scenarios, Avalanche noted.

What was tested?

1️⃣ End-to-end token transfer

2️⃣ Secondary transfer for trading

3️⃣ Validating new capabilities with collateralized lending

These use cases demonstrate practical applications of blockchain in streamlining operations, enhancing transparency, and enabling new…

— Avalanche 🔺 (@avax) February 14, 2024

Explaining the use of Avalanche Spruce, Citi highlighted in a report that Avalanche delivered the necessary infrastructure for this private, permissioned blockchain test network, ensuring that it could fulfill the customized requirements. According to the firm, Avalanche infrastructure’s attributes, such as multi-level permissioning, EVM compatibility, and customizability, align with institutional needs and regulatory frameworks.

Wellington Management’s Mark Garabedian, Director-Digital Assets & Tokenization Strategy, also noted that the Avalanche infrastructure provided an ideal environment to test blockchain technology’s application to asset management.

“The Avalanche Spruce test network has proven to be an ample technical sandbox environment for exploring the potential of blockchain technology within our industry,” said Garabedian.

Citi’s pilot reveals that tokenization has the potential to revolutionize traditional markets by unlocking new value, automating processes, and creating more efficient and transparent systems.

“Tokenization unlocks the value in traditional markets to new use cases and digital distribution channels while enabling greater automation, more standardized data rails, and even improved overall operating models, such as those facilitated by digital identity and smart contracts. These are significant advantages over traditional models,” Citi wrote.

By tokenizing private funds, Citi is demonstrating its recognition of the significant efficiency gains and accessibility that digitization can offer, compared with the state of private markets today, which are often fragmented and operationally complex despite being worth over $10 trillion.

With the proof of concept showing the benefits of private market tokenization, Citi plans to move forward with several key priorities. The firm expects to bring private markets onto digital networks to increase transparency, liquidity, and accessibility, potentially unlocking new opportunities for investors and asset owners.

“Our evaluation showed that providing a flexible on-ramp for traditional assets to digital networks for distribution and enabling a compliant and efficient environment for management and servicing of these assets has the potential to transform the way private market assets are held and transacted today,” Citi concluded.