- Key insight: The latest tokenized asset effort at a large bank is Citi's Digital Depositary Receipts, which tokenizes shares in private companies.
- What's at stake: Citi says the new service gives privately held companies a secure way to raise money.
- Forward look: The bank would like other financial institutions to participate in this service, rather than build their own version of it.
Citi recently launched a service that lets wealthy and institutional clients invest in tokenized shares of private companies on a blockchain.
The digital ledger is operated by SIX Securities Depository, the national central securities depository for the Swiss financial market (akin to the DTCC in the U.S., which is
Citi says the new service, which is called Digital Depositary Receipts, gives private companies an alternative way to raise money, as IPOs become more rare.
It comes at a time when many banks are thinking about and piloting digital asset services. For instance, big banks including JPMorganChase, Citi and Bank of America are collaborating to build a shared, interbank tokenized deposit network operated by The Clearing House that will allow bank deposits to be converted to digital tokens for instant transfer on a blockchain. Custodia Bank in Wyoming and Vantage Bank in Texas began issuing tokenized deposits last year, and recently reached an agreement with Participate, a network of 600 banks that digitizes loan participations
Midsize institutions such as Huntington Bancshares, M&T Bank and First Horizon are working with the blockchain-based
Citi says the new service, which it calls Digital Depositary Receipt, lets companies improve distribution — companies that use the service will be put in front of Citi's institutional investor and wealth management clients — and obtain liquidity while maintaining control over voting. Having the share ownership records on a blockchain will speed up settlement time and transfer of ownership, according to the bank.
For investors, the Digital Depositary Receipt is a standard security that can sit in their portfolio alongside their public stocks.
The bank declined to say how much it charges for the service, but there will be transaction and maintenance fees.
In the first transaction, some of Citi's wealth management clients invested in Kaleido, an institutional tokenization and digital asset platform and a Citi portfolio company, using the service.
"Private companies like ours are scaling faster than the structures around us," said Steve Cerveny, founder and CEO of Kaleido, in a statement. "This model finally brings a level of professionalism and transparency to private market capital formation that we've never had access to."
As private markets have grown, so has the need for diverse and trusted access points, said Biswarup Chatterjee, head of partnerships and Innovation for Citi's services business. Citi's new service "is designed to provide superior client service, safeguard assets and facilitate capital markets activity with the same rigor that underpins traditional financial markets," he said.
Citi is considering future extensions of this offering to operate across both digital and traditional financial market infrastructures, as well as multiple blockchain networks.
"This is a meaningful step in the broader institutional adoption of tokenization, particularly in private markets, where access and liquidity have historically been constrained," Clare Adelgren, global blockchain leader at EY, told American Banker. "What stands out is not just the use of blockchain technology, but the application of a familiar structure, depositary receipts, to create a more streamlined, transparent way for investors to gain exposure to private company equity."
At the same time, Adelgren sees this as an incremental development rather than a market transformation on its own.
"We're already seeing strong momentum across the industry, with banks exploring tokenization to improve settlement efficiency and modernize legacy infrastructure, so it's likely others will continue to test similar approaches," she said.
Citi would like other banks to participate in this new service, rather than build their own, competing offerings from scratch.
"The opportunity is clear in terms of efficiency and new market access, but the risks are equally important, particularly around regulatory clarity, governance, and how these models integrate with existing financial systems," Adelgren said. "Ultimately, the pace of adoption will depend less on the technology itself and more on how well these solutions are standardized, regulated and trusted at scale."
