The private equity market is a $5.3 trillion behemoth — a world of late-stage startups, venture-backed giants, and unicorns that most investors never get to touch. But with Citi’s new partnership with SIX Digital Exchange (SDX), that could be about to change.

On Tuesday, Citi announced plans to tokenize pre-IPO shares on SDX’s regulated blockchain platform, with a launch set for Q3 2025. For early backers and employees of high-growth private companies, this could mean a faster, more efficient way to cash out without waiting for the elusive IPO. For institutional investors, it could open doors to assets once considered off-limits.

But beneath the buzzwords — liquidity, democratization, blockchain — lies a more complex narrative.

From Illiquid to Tokenized — But at What Risk?

Private equity has traditionally been a market of privileged access, with deals negotiated in smoke-filled rooms and governed by opaque contracts. Tokenization, in theory, promises to change that.

Citi and SDX’s approach is simple:

• Tokenize late-stage private shares to bring liquidity to illiquid assets.
  
• Use SDX’s regulated Central Securities Depository (CSD) as a trusted intermediary.
  
• Enable institutions to trade fractionalized equity in a controlled, compliant environment.
  

But the devil is in the details. Tokenizing private shares could transform cap table management and broaden access to assets previously locked away. Yet, the very act of fragmenting ownership into digital tokens introduces new layers of complexity and risk.

For example, how will issuers manage corporate governance when shares are fractionally owned and dispersed across a blockchain ledger? And what happens to investor protections when a blockchain transaction goes wrong?

The Institutional Gold Rush — or a Trojan Horse?

For Citi, the partnership is part of a broader strategic pivot toward digital assets. While banks and asset managers have been slow to adopt tokenization, this initiative signals a new era where Wall Street embraces blockchain — but on its own terms.

Ryan Marsh, Head of Innovation & Strategic Partnerships at Citi, framed the initiative as a game-changing play:

“Tokenization isn’t just about assets — it’s about building the infrastructure for a digital-first economy.”

But let’s not forget: the same infrastructure that democratizes access could also centralize power in the hands of a few gatekeepers. With Citi as the tokenization agent and custodian, the project creates a single point of control over private assets.

What happens if Citi’s systems go down? Or worse — what if regulators take issue with the underlying assets?

Tokenization promises more transparency, but it could also make assets more vulnerable to regulatory overreach and operational risks.

Swiss Regulation: The Hidden Catalyst

Why Switzerland? It’s not just the chocolate and Alps. Swiss regulation has become a blueprint for tokenization, creating a legal framework that treats digital assets as securities and establishes clear rules for custody and settlement.

Marni McManus, Citi’s Country Officer for Switzerland, emphasized the regulatory clarity as a key enabler:

“Swiss law provides a bridge between traditional finance and digital assets, allowing us to create a controlled, scalable solution for tokenized shares.”

But regulatory clarity doesn’t mean risk-free. By launching the initiative in Switzerland, Citi is testing the waters in a relatively crypto-friendly jurisdiction. If the model succeeds, expect a broader rollout across other markets. If it fails, Switzerland could become a cautionary tale about over-promising and under-delivering on tokenization’s true potential.

Tokenized Everything: Is This the Future?

Dea Markova, Policy Director at Fireblocks, suggests that tokenization isn’t just about private equity. It’s about a world of tokenized everything — from real estate and commodities to intellectual property and gaming assets.

“We’re imagining a future where everything is tokenized, where every asset can be fractionalized, traded, and settled on-chain,” Markova said.

But is that future realistic? If tokenization is applied too broadly, the result could be a market of fragmented assets and thin liquidity, where price discovery becomes murky and asset valuations less stable.

The Citi-SDX project is a bold first step, but it’s also a test case for the entire financial industry. Will tokenization finally deliver on its promise to democratize access and create new liquidity streams? Or will it become just another tool for the powerful to consolidate their control over capital markets?

Bottom Line

The tokenization of private shares is a bold bet — one that could either bring unprecedented liquidity to private markets or expose them to new and unforeseen risks. As Citi and SDX forge ahead, the rest of the financial world will be watching closely. Because if private equity can be tokenized, then everything else is next.