Citibank utilizes Avalanche AVAX to test tokenization of private equity funds

According to CoinDesk's report, Citibank is testing the tokenization of private equity funds using Avalanche AVAX's Spruce Subnet, attempting to leverage blockchain technology to explore new operational models and enhance market efficiency.

Custom Subnets Launched by Avalanche

Although Avalanche is a Layer 1 public chain, it has recently launched many customized subnets. These subnets are sovereign networks that define their own membership and token economic rules. They are composed of a set of validators, in this case, validators for Avalanche, who work together to achieve consensus on the state of one or more blockchains.

Avalanche has introduced Evergreen Subnets tailored for financial institutions, providing a blockchain deployment, tools, and customized services. These institutions can implement their blockchain strategies on a private, permissioned chain with known and approved counterparties while retaining the ability to communicate with other subnets via Avalanche's native communication protocol Avalanche Warp Messaging (AWM). This allows users to transfer data, communicate, and exchange assets without relying on third-party intermediaries.

Avalanche also has multiple subnets based on the Ethereum Virtual Machine (EVM) responsible for different functions, including:

• Intain Subnet: Tokenized asset-backed securities (ABS)
• Deloitte Subnet: Forex management under the Foreign Exchange Management Act (FEMA) fund platform

Reportedly, traditional financial companies such as T. Rowe Price, WisdomTree, Wellington Management, and Cumberland joined in April last year to enhance trading execution and settlement efficiency.

Citi Tests Tokenization of Private Equity Funds

Citi collaborated with traditional financial companies WisdomTree and Wellington Management to conduct a proof-of-concept experiment on Avalanche's Spruce subnet. Spruce is an Evergreen Subnet designed for large financial institutions looking to leverage public blockchain infrastructure.

Citi's new test focuses on the tokenization of private equity funds, utilizing smart contracts for automation to test end-to-end token transfers, secondary transfers for transactions, and validating new features through collateralized loans.

Nisha Surendran, Head of Citi's Digital Asset Emerging Solutions, stated:

We believe that by testing the tokenization of private assets, we are exploring new operational models and creating efficiencies for a broader market.