Citi and Fidelity International have released a proof-of-concept (PoC) of an on-chain money market fund (MMF) with digital FX swap solution.
The solution could enable investors to conduct seamless and real-time settlement of multi-asset positions in different currencies, the firms say.
In addition, the new solution has been designed to enable faster, seamless management of treasury positions, eliminate delays and improve efficiency.
According to Citi, it could enable investors to access higher yields on foreign cash funds while managing liquidity and FX risk in real-time.
For example, a corporate treasurer holding non-USD working capital could invest in US dollar-denominated MMFs to enhance portfolio diversification and yield potential, while ensuring continuous operational liquidity.
Citi and Fidelity International explored smart contracts to synchronise settlement of simulated FX swaps and issuance/redemption of simulated MMF tokens, using interoperability protocols to connect separate networks.
The entities also tested built-in fund token standards designed to ensure compliance with on-chain permissions throughout the entire fund lifecycle.
The Citi and Fidelity International collaboration is under the Monetary Authority of Singapore’s (MAS’s) Project Guardian — a global collaboration between policymakers and industry players to enhance liquidity and efficiency of financial markets through asset tokenisation.
Sam Hewson, global head of FX sales at Citi, says: “As tokenisation 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.”
Emma Pecenicic, head of digital propositions and partnerships, APAC ex Japan, distribution at Fidelity International, adds: “Fidelity International is committed to exploring the real-life applications of asset tokenisation. Our aim is to develop practical approaches that promote capital efficiency, democratise access to financial services, and bring value to our clients.
“As a global asset manager, we are excited to engage with partners like Citi to explore technological innovations like this on-chain money market fund with digital FX swap solution to better understand the efficiencies it can bring, as well as help establish best practices and standards for tokenised funds for the benefit of investors.”
The solution will be showcased at the MAS booth at the Singapore FinTech Festival 2024.
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