Citi Partners With SDX To Tokenize $75 Billion In Non-Publicly Traded Shares

Citi, a global banking giant, and SIX Digital Exchange (SDX), the digital assets arm of Switzerland's main stock exchange, have announced a partnership to tokenize non-publicly traded shares. This initiative aims to streamline a $75 billion market that is currently burdened by PDFs and paper documents.

Under this collaboration, Citi will serve as the custodian and issuer agent for tokenized versions of late-stage, pre-IPO equities on SDX’s regulated blockchain-based Central Securities Depository (CSD) platform. The platform is expected to launch in the third quarter of the year, with a focus on Switzerland, Singapore, and other parts of Asia, excluding U.S. investors.

Private shares in high-growth, venture-backed companies represent a significant and attractive segment of the alternative asset class, valued in the trillions of dollars. Many firms with valuations exceeding a billion dollars are choosing to remain private longer due to market conditions that delay IPOs. This trend has led companies to seek secondary markets to provide liquidity for investors and employees. However, the current process is fraught with challenges, including manual transactions and a lack of scalable infrastructure.

Nisha Surendran, digital asset emerging solutions lead at Citi Ventures, highlighted the inefficiencies in the private markets. Investors often face a complex set of PDFs and paper documents, and the settlement of a transaction can take five to eight weeks. This process must be repeated when an investor wants to exit their position. Additionally, these investments do not flow into investors’ wealth statements like public securities, often remaining encapsulated in PDFs or paper documents.

While traditional financial institutions have shown interest in tokenizing real-world assets, the early days of this trend saw more attention than actual delivery. Many Web3 projects aimed to use blockchain technology to streamline outdated processes and enable easy access and distribution for private markets. However, these projects encountered regulatory hurdles that hindered their progress.

David Newns, CEO of SDX, noted that Switzerland has a mature digital-securities regulatory environment, which has been in place since 2021. This regulatory framework has allowed SDX to build a blockchain-based securities depository on R3’s Corda distributed ledger technology. Investors can access these tokenized securities through their broker and custodian, making the process seamless and similar to traditional securities transactions.

This partnership also marks Citi's entry as a custodian on SDX, aligning with the bank's strategy to provide clients with access to new digital asset markets globally, including private market assets. Nadine Teychenne, Citi’s global head of digital assets, investor services and issuer services, emphasized that this initiative is part of a broader project across multiple businesses at Citi.

Digital asset banking group Sygnum and Singapore-based financial institution SBI Digital Markets will assist in providing access to the pre-IPO equities that Citi will bring onto the SDX platform. This collaboration is expected to bring significant improvements to the efficiency and accessibility of the pre-IPO shares market, benefiting both investors and the companies involved.