Citibank and Fidelity International Announces Proof-of-Concept Digital FX Swap to Streamline Real-time Settlement

Key Notes

• Citibank and Fidelity International could expand the latest solution to unlock further efficiency and enable interoperability in tokenized assets.
• The RWA tokenization industry is expected to grow exponentially in the coming years fueled by institutional investors and favorable regulatory environments.

Amid the mainstream adoption of blockchain’s smart contracts through real-world assets (RWA) tokenization Citibank and Fidelity International have announced the launch of a proof-of-concept of an on-chain money market fund with digital foreign exchange (FX) swap. According to the announcement, the latest solution by Citi and Fidelity will demonstrate real-time settlement of funds to enable improved overall efficiency.

Moreover, the tokenized MMF with an embedded digital FX swap will focus on streamlining the management of treasury positions. As a result, the respective customers can access higher yields on more global funds while still managing FX risks in real time.

The two companies explored the potential of smart contracts on multichain blockchains to develop their new solutions. Furthermore, the two entities tested built-in fund token standards in a bid to ensure a sustainable future via regulated channels.

“As tokenization continues to evolve in capital markets, we see a potential future in which investors could trade and settle digital assets in real-time, in different currencies, and across multiple distributed ledger technology platforms. FX markets could enable investors to quickly and efficiently access digital assets globally, with timely liquidity. This innovation could also open potential opportunities to address broader goals, such as portfolio diversification and risk management,” Sam Hewson, Global Head of FX Sales at Citi, noted.

Why the New Solution by Citibank and Fidelity International Matters

The two entities intend to venture into the tokenized MMFs, an area that analysts forecast could hit $400 billion by 2030. Moreover, the dollar MMFs have grown to over $6.1 trillion in assets under management (AUM) in the recent past.

The launch of the on-chain MMF with a digital FX swap solution is expected to be showcased at the Monetary Authority of Singapore (MAS) booth during the Singapore FinTech Festival 2024 which will be held between November 6 and 8.

The strategic launch in Singapore will significantly boost its adoption in the near future. Over the past years, Singapore has grown to a major supporter of blockchain technology and crypto assets, through supportive regulatory frameworks.

The cryptocurrency market and blockchain technology are expected to grow exponentially ahead irrespective of political outcome in major jurisdictions led by the United States. Furthermore, more institutional investors are seeking to tokenize real-world assets to reach global markets seamlessly.

“We continue to partner with our clients and to explore blockchain use cases across our Markets business. While the current solution tested settlement of tokenized MMFs denominated in foreign currencies, the underlying technology could potentially be expanded in the future to unlock further efficiencies and enable compatibility with other tokenized assets,” Deepak Mehra, Global Head of Digital Assets and International Lead for Strategic Investments for Markets at Citigroup, noted.

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