Citigroup Set to Launch Tokenized Shares of Private Companies

Key Insights

• Citibank to launch tokenized shares of private companies for wealthy clients and institutional investors
• The move is part of Citi’s broader crypto expansion.
• Interest in private equity has reached new heights and is fuelling the introduction of tokenized products and derivatives.

Citigroup is preparing to launch a platform that will provide wealthy and institutional clients with tokenized access to private companies. According to a report from The Wall Street Journal, the offering will initially be available to clients outside the United States before expanding domestically.

The bank plans to use blockchain infrastructure for the platform and is reportedly discussing participation with several large private companies.

Citi to Offer Private Equities Through Digital Depository Receipts

The private shares will be available through depository receipts, which allow investors to purchase a stake in foreign companies through bank-issued certificates. Citi will be responsible for the issuance and custody of these authorized digital depository securities.

According to the bank, this is a better alternative to the existing framework for buying tokenized private stocks. Most investors gain exposure to private companies through special-purpose vehicles. However, that has come under scrutiny for a lack of transparency.

Citi executive Artem Korenyuk noted that “investors don’t know what they’re actually buying” through this approach, and that it offers “a very clear alternative model.” Switzerland-based SIX Digital Exchange has been tapped as the blockchain infrastructure with plans to expand to other networks.

Meanwhile, the new product represents progress on Citi’s tokenization goals. The bank has been working on tokenization for several years, launching a pilot for its Token Services product in 2023.\

As part of its tokenization ambitions, the bank is also involved in  The Clearing House’s plans to launch a tokenized deposit network by next year.  The Clearing House is a payments company owned by a consortium that includes JPMorgan Chase, Citigroup, Bank of America, Wells Fargo, and others.

Interest in Private Equities Fuels New Blockchain-Based Products

The move highlights the massive investor interest in private companies, especially as several mega startups such as SpaceX, Anthropic, and OpenAI line up for IPOs. With startups now spending more time in private markets, financial institutions are increasingly focusing on ways to make them accessible.

Citi is not the first firm to offer tokenized private equities to investors. Robinhood said last year it would offer tokenized shares of OpenAI and SpaceX in Europe, while Republic also launched a similar product.

However, there have been concerns that other tokenized private equities are not authorized by the companies issuing them. For instance, OpenAI pushed back on Robinhood offering its tokenized securities, noting that it did not authorize it.

For Citi, its tokenized depository receipt is authorized. This could mean an advantage over existing opaque pre-IPO tokenization models.

Interestingly, tokenized securities are not the only way investors can gain exposure to private companies. There is also a growing market for pre-IPO perpetual futures.

Several crypto exchanges, including decentralized perps exchange Hyperliquid and centralized platforms such as Coinbase and Binance, listed SpaceX perps ahead of its IPO.

According to Reuters, citing data from Talos, SpaceX pre-IPO perps attracted around $3.2 billion in volume between May 17 and June 10. Binance also claimed that its SpaceX pre-IPO perps saw $2.1 billion in trading volume within 18 days.

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