Today Citi Securities Services announced it will provide digital custody services for the BondbloX Bond Exchange (BBX). The Singapore-regulated exchange uses DLT to offer fractional bonds. BondbloX enables accredited and professional investors to buy as little as $1,000 in digital bonds. It does so by holding full sized bonds usually offered in denominations of more than $200,000.
At first we were confused because Citi announced it would be a BondbloX custodian in 2021. However, that was for the underlying full denomination bonds. Now it will custody the fractional version – the digital bonds.
That’s an important step because many institutional investors avoid solutions that don’t fit in with their existing custody infrastructures. Citi can potentially make using BondbloX seamless, substantially expanding the potential investor base. Apart from fractionalization, the BondBlox solution also enables atomic settlement.
“This proprietary digital custody technology is scalable and will allow us to provide settlement and custody services for clients investing in assets issued on permissioned blockchain networks and digital FMIs (financial market infrastructures),” said Nadine Teychenne, Head of Digital Assets for Citi Securities Services. “It enables Citi to connect to newly permissioned networks as they emerge and provide a fully consolidated custody service through a single operating model.”
Citi digital asset custody
Most securities services groups are developing proprietary solutions, but many additionally leverage third party software for some aspects. For example, Citi partnered with digital asset custody tech firm Metaco, recently acquired by Ripple. Shortly afterward, Bloomberg reported that Citi was reviewing the relationship.
Citi is the world’s fourth largest global custodian with assets under custody of $27.8 trillion.
Meanwhile, BondbloX first launched in 2020 and uses the Hyperledger Sawtooth blockchain. We don’t believe the bonds are ‘tokenized’.
Citi is an investor in BondbloX alongside MassMutual Ventures. Other backers include a Singapore family office Ocatava and incubator Potato Productions.
Northern Trust is also a custody provider for the underlying bonds.
