Citi, Fido Demo Tokenized MMF, Swap
A press release titled, "Citi and Fidelity International demonstrate tokenized Money Market Fund and Digital Foreign Exchange Swap solution," states, "Citi and Fidelity International announced the proof-of-concept of an on-chain money market fund (MMF) with digital foreign exchange (FX) swap solution which demonstrates real-time settlement. The solution will be showcased at the Monetary Authority of Singapore (MAS) booth at the Singapore FinTech Festival 2024, happening from 6 to 8 November." It continues, "This innovative on-chain solution could enable investors to conduct seamless and real-time settlement of multi-asset positions in different currencies. The successfully tested solution -- a tokenized MMF with an embedded digital FX swap -- has the potential to enable faster, seamless management of treasury positions, eliminate delays and improve efficiency. It could also 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 (USD MMFs) to enhance portfolio diversification and yield potential while ensuring continuous operational liquidity. The proof-of-concept results from a collaboration between Citi and Fidelity International. It successfully shows that the solution could run faster, programmable multi-asset transactions on-chain, which is currently not possible with traditional market infrastructure. Citi and Fidelity International explored smart contracts to synchronize settlement of simulated FX swaps and issuance/redemption of simulated MMF tokens, leveraging interoperability protocols to connect separate networks. They also tested built-in fund token standards designed to ensure compliance with on-chain permissions throughout the entire fund lifecycle." The release adds, "Tokenization refers to the creation of tokens on a blockchain to record information about underlying assets and liabilities including their attributes or characteristics, status, transaction history, and ownership. Tokenized MMFs are expected to be the fastest-growing digital asset class, reaching USD 400 billion by 2030. USD MMFs have a large number of issuers with over USD 6.1 Tr AUM. To access USD MMFs while mitigating FX risk, non-USD investors currently book and manually reconcile FX hedging separately. This can create friction, timing mismatches and FX transaction risks. A settlement delay can also prevent precise, real-time liquidity management. Tokenized MMFs with digital FX swaps would potentially enable faster, near-instant transactions, and increase liquidity and efficiency. The Citi and Fidelity International collaboration is under the MAS' Project Guardian, a global collaboration between policymakers and key industry players to enhance liquidity and efficiency of financial markets through asset tokenization."
