The firms are showcaing the solution at the Singapore FinTech Festival which will be open tomorrow until Friday.

Citigroup and Fidelity International yesterday announced the proof-of-concept of a blockchain-based money market fund containing a foreign exchange swap solution, an example of how blockchain technology continues to advance.

(A foreign currency swap is an agreement between two foreign parties to swap interest payments on a loan made in one currency for interest payments on a loan made in another currency.)

The firms are showcasing the solution at the Singapore FinTech Festival, taking place from 6 to 8 November. They said the offering enables investors to conduct seamless and real-time settlement of multi-asset positions in different currencies.

Explaining an example of what the fund can do, investors can gain access to higher yields on foreign cash funds while managing liquidity and forex risk in real time. For example, a corporate treasurer holding non-dollar working capital could invest in dollar-denominated money market funds to spread risk in portfolio and sources of yield, and ensure continuous liquidity.

The collaboration between Citigroup and Fidelity International is under the Project Guardian umbrella of the Monetary Authority of Singapore. The Project is a global collaboration between policymakers and industry players seeking to enhance liquidity and efficiency of financial markets through asset tokenization.

“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,” Sam Hewson, global head of FX Sales at Citigroup, said.

Separately, as an example of the rise of blockchain-linked investments, earlier this week UBS Asset Management launched its first tokenized investment fund.

Fund tokenization refers to the use of blockchain-based digital tokens to represent fund ownership, functioning similarly to the way in which transfer agents record fund shares today. In early tokenization use cases, for example, companies used special purpose vehicles (SPVs) to manage assets such as real estate. Similarly, fund tokenization can be achieved by using existing unit trusts and/or fund company vehicles. 

A white paper issued last week from Invesco, Boston Consulting Group and Aptos Labs, says that AuM of tokenized funds could hit $600 billion by 2030.