Citi has launched Digital Depositary Receipts, allowing investors to acquire stakes in private companies via blockchain technology, addressing the growing interest in private markets.
Citi has launched a groundbreaking service aimed at affluent and institutional investors, allowing them to purchase stakes in private companies using blockchain technology. This move reflects a growing trend among leading banks to merge traditional financial assets with digital ecosystems.
The new product, called Digital Depositary Receipts, offers investors access to private company shares through securities managed in a blockchain format by Citi. This innovative approach comes at a time when many high-growth companies are postponing their public listings, thus curtailing investor opportunities in these attractive private markets. Additionally, there is increasing interest in private equity as alternatives to public stocks are sought.
A Citi spokesperson indicated that the initiative aims to enhance responsible access to digital asset markets, underscoring the bank’s commitment to expanding investment avenues for its clientele.
The offering debuted with a deal involving Kaleido, a firm specializing in digital assets and tokenization, supported by Citi Ventures and its wealth management investors. The structure modifies traditional depositary receipts, enabling investors to gain exposure to private companies via bank-issued securities, while the blockchain infrastructure is managed by SIX, a Swiss entity.
This framework allows investors to hold digital representations of financial instruments, meaning they own the depositary receipt instead of the actual shares, with Citi acting as the issuer and custodian. The bank believes this strategy will enhance transparency and simplify the investment process in private markets, contrasting with existing models that often rely on complex structures involving many intermediaries.
This launch is part of a broader shift among major financial institutions looking to tokenize traditional assets, converting physical assets such as stocks and bonds into digital tokens on blockchain networks. Advocates suggest that tokenization may streamline settlement processes and reduce costs, fostering continuous market activity.
Citi is positioning itself at the forefront of this transformation, recently announcing plans with other major U.S. banks to create a shared tokenized deposit network by 2027, which will convert traditional deposits into blockchain tokens while adhering to regulatory standards. The current private-share offering leverages infrastructure provided by SIX, with aspirations to expand to public blockchain networks in the future, potentially broadening participation for investors and institutions.
