Tokenization refers to the digitization of assets on a blockchain. It has been touted as a way to improve the efficiency of financial transactions and help to fractionalize large assets such as real estate.
The trials are part of Project Guardian, an initiative led by the Monetary Authority of Singapore to test the use of digital assets and distributed ledger technology in supporting financial transactions such as the clearing and settlement of payments and securities.
The collaboration with Citi has the potential to be adapted to traditional assets such as loans and fixed-income instruments, said Blue Macellari, head of digital asset strategy at T. Rowe Price, in emailed comments.
"One promising aspect of Citi's application is that blockchain execution allows for the client or asset manager to own its own quote and execution data, which translates to robust real-time post-trade reporting and analytics as well as continuous access to all historical data," she said.
She expects that post-trade workflows such as settlement functions and the middle office will be the first to see at-scale blockchain deployment, and that the trading of tokenized traditional assets will likely follow, which will facilitate the full trading workflow.
T. Rowe Price had $1.31 trillion in assets under management as of Oct. 31.
The project with Citi has so far tested spot FX for U.S/Singapore dollar trades but the underlying solution could theoretically be used for any fiat currency pair, Citi said in a separate statement on Nov. 15. Also, because it is a trial, the solutions are not currently used in the execution of live trades for clients.
A Fidelity International spokesperson declined to offer further details but provided a comment from the Citi statement that said that as a global asset manager, Fidelity is keen to explore technological innovations and understand the efficiencies that the technology can bring to processes for the benefits of investors. Fidelity International had $714.3 billion in AUM as of Sept. 30.
Separately, Franklin Templeton, which had $1.4 trillion in AUM as of Sept. 30, is conducting a pilot program that explores the issuance of a tokenized money market fund that uses digital assets networks to maintain records of fund shares under Project Guardian. A spokesperson declined to provide further information.
Franklin Templeton also has a U.S.-registered tokenized money market fund product that has over $314 million in assets under management as of Oct. 31 that processes transactions and records share ownership on a public blockchain.
J.P. Morgan has also collaborated with alternative asset manager Apollo, which has $631 billion in AUM, on the use of digital assets and automated portfolio rebalancing, which reduces the complexities of manual processes in asset servicing. Both companies did not respond to requests for comment.
