Citigroup has announced the launch of a new blockchain-powered platform that will enable investors to buy and sell shares of private companies, increasing their involvement in private firms before they go public. According to a report by The Wall Street Journal, the platform will utilise tokenised depositary receipts issued by Citi that will represent ownership interests in private companies. This service will initially be available to foreign investors, with access for US users to follow at a later date. The initiative will give a chance to investors to invest in private company shares “right next to their Apple stock”, said Citi digital asset executive Artem Korenyuk.
Tokenised Depositary Receipts to Offer Access to Private Firms
Traditional financial markets are getting modernised as major banks are increasingly adopting tokenisation. The Wall Street Journal reports that Citi proposes the use of structured deposits to provide transparency, rather than special-purpose vehicles (SPVs), which have been used by some parties to invest in private entities in a manner that lacks transparency.
Various fintechs like Robinhood have attempted to create a product that offers tokenised access to privately held firms like OpenAI, but they are not actual equity stakes; these instruments only offer economic exposure to the firm’s stock. OpenAI itself issued a warning last year stating that such tokenised stock is not equity ownership in the company.
In May, Citibank’s direct competitor also announced their plan to launch a tokenised money market fund on Ethereum, which will allow stablecoin issuers to hold the reserves backing their stablecoins in a regulated, cash-like vehicle while earning interest. The “OnChain Liquidity-Token Money Market Fund,” with the ticker JLTXX, will invest in US Treasury bills and overnight repurchase agreements secured by US Treasurys or cash, said the paperwork filed with the US Securities and Exchange Commission.
Investors are subject to a minimum investment requirement of $1 million (roughly Rs. 95 crore), and the fund carries a 0.16 percent annual fee after waivers. JPMorgan’s blockchain unit, called Kinexys Digital Assets, will be managing the fund.
Tokenisation has been a tricky sector in the crypto industry. Last year, the International Monetary Fund (IMF) had also said that tokenisation of assets could significantly improve efficiency in financial markets, while also introducing new risks that regulators must address. The IMF said in their report that tokenisation can make processes such as settlement and ownership transfer easier, lowering costs and making things clearer.
However, it also warned that the rapid adoption of tokenised systems could pose challenges related to financial stability, governance, and regulatory oversight across global markets. The findings highlight the growing need for policymakers to adapt to advancing financial technologies.
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