Overview

Citigroup (Citi), T. Rowe Price Associates, Inc., and Fidelity International collaborated under the Monetary Authority of Singapore's Project Guardian, developing an On-Chain Request for Streaming (RFS) Application testing the use of blockchain infrastructure to price and execute simulated bilateral trades in an institutional-compliant manner.  

A combination of Ava Labs' AvaCloud and Avalanche Evergreen Subnets powered an FX platform simulating bilateral FX pricing and execution.

Challenge

By 2030, up to $10T of institutional assets could be on-chain. Key considerations for institutional-grade trading platforms looking to incorporate such new technologies include capital efficiency, Anti-Money Laundering (AML)/Know-Your-Customer (KYC), information confidentiality, and post-trade analytics. 

Opportunity

The team behind Citi identified an opportunity where blockchain technology could provide a new form of infrastructure and improved workflows. This would not only generate an immutable history of transactions but also reduce the overall cost and time it takes to perform them. 

To test the viability of on-chain finance for their RFS application, Citi used Ava Cloud to price and execute simulated bilateral spot foreign-exchange (FX) trades and leveraged an Avalanche Evergreen Subnet to capture price quotes and simulate trade confirmations specific to each counterparty. 

The Evergreen Subnet are blockchains customized for institutional applications, specifically designed for company-specific and industry-wide considerations. Built-in and further customizable features include EVM compatibility, permissioning at the validation, smart contract deployment, transaction levels, network privacy, and custom gas features. Overall, the Evergreen Subnet reap the benefits of public network development, innovation, and native integrations while enabling embedded, blockchain-level features only possible in enterprise blockchains.

Blockchain Solution

The RFS application enables immediate trade execution at current prices, which is ideal for fast-paced and time-sensitive markets while reducing trade time and execution complexity. Citi leveraged Avalanche to ensure secure and efficient trade execution by capitalizing on RFS' dynamic pricing model.

The Avalanche Evergreen Subnet was customized to maintain high transaction privacy and data security. AvaCloud managed the design and implementation of the RFS app and its Avalanche Evergreen Subnet, allowing Citi to successfully operate a regulatory-compliant product that provided AML/KYC services, executed and settled low-cost transactions with near real-time finality, and automatically stored all data immutably. 

Results

• Greater Transparency - RFS simulated quotes and trade confirmations with timestamps are recorded on the blockchain, providing real-time status and transparency. 

• Increased Auditability and Security - RFS simulated data is stored in a tamper-proof manner, and all simulated pricing and trading activities are initiated via blockchain-based wallets in a cryptographically secure manner.

Why Citi Chose Avalanche

Citi chose Avalanche for the RFS application because of its Avalanche Evergreen Subnet architecture, allowing Citi and other similar institutionally-focused firms to meet specific requirements and considerations around compliance, permissioning, geographic infrastructure hosting, and more.

"We are excited to see leading financial services institutions using Avalanche to develop innovative solutions for the foreign exchange market and the broader capital markets,” said John Wu, President of Ava Labs. “Avalanche's speed, scalability, and customizability make it the ideal platform for building on-chain applications that can meet institutional needs.”

Let's Get Technical

RFS replicated the Request For Quote (RFQ) process of the FX trade lifecycle on a blockchain, addressing key requirements such as regulatory compliance, privacy, capital efficiency, and competitive pricing. All price quotes and trade confirmations will be recorded on the blockchain, providing immutable record-keeping and allowing for best execution and other post-trade analysis within a single platform. Clients could use their wallets for identification, receive streaming prices, and confirm their trades on-chain in a cryptographically secure manner. Data access and visibility would be designed to be consistent with existing institutional practices, such as only allowing counterparties of a quote and/or trade to access and view underlying data. As a result, subject to applicable laws and regulations, data privacy and confidentiality would be preserved.

AvaCloud enabled Citi to deploy the RFS Subnet solutions quickly and efficiently, taking on all blockchain-related duties while providing fully managed Subnet deployment, no-code customization, and automated infrastructure. AvaCloud allows institutions to focus on their business operations and objectives and realize all the benefits of on-chain functionality.

The Avalanche Evergreen Subnet deployed for Citi's Project Guardian initiative also leveraged Avalanche's native intranetwork interoperability. As interoperability becomes increasingly important, Avalanche Warp Messaging (AWM) is another compelling network feature that enables interoperability without third-party bridges or trust assumptions.

Citi’s commentary on the Request for Streaming Application can be found here.

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