Citi has unveiled a new method for affluent and institutional investors to acquire stakes in private companies by leveraging blockchain technology, reflecting a broader trend among major banks to integrate traditional financial assets into digital asset frameworks.
On Thursday, the bank introduced its Digital Depositary Receipts, which enable investors to access private company shares via securities issued and held by Citi in a blockchain-based format.
This initiative is timely, as numerous rapidly growing firms are delaying their public offerings, thereby limiting investor access to these desirable private entities. Concurrently, interest in private market investments has surged as investors seek alternatives to public equities.
A Citi representative stated, "Our focus with Digital Depositary Receipts is to continue to expand responsible access to digital asset markets," highlighting the bank's commitment to enhancing investment opportunities.
The product debuted through a transaction with Kaleido, a digital asset and tokenization firm supported by Citi Ventures and investors from Citi's wealth management division.
The structure of this new offering adapts traditional depositary receipts, which have long allowed investors to gain exposure to shares via bank-issued securities. Citi has modified this framework for private companies and is utilizing blockchain infrastructure managed by Swiss operator SIX.
As a result, investors will hold digital representations of these financial instruments, owning the depositary receipt rather than the underlying shares directly, with Citi serving as both the issuer and custodian.
The bank contends that this method could simplify and enhance transparency in private market investing, contrasting with existing structures that often depend on special-purpose vehicles and multiple intermediaries.
This launch is part of a larger movement by significant financial institutions to tokenize conventional assets, which involves transforming tangible assets like stocks and bonds into digital tokens that can traverse blockchain networks.
Proponents of tokenization argue that it could eventually streamline settlement processes, reduce costs, and facilitate continuous market operations.
Citi has been at the forefront of this transition. Earlier this month, the bank announced plans, alongside several large U.S. banks, to establish a shared tokenized deposit network through The Clearing House by mid-2027, converting traditional bank deposits into blockchain-based tokens while maintaining regulatory compliance.
Currently, Citi's private-share offering is operating on infrastructure provided by SIX, with plans to broaden the offering in the future to include public blockchain networks, potentially allowing more investors and institutions to engage.