When Citi says it too: tokenization is infrastructure, not liquidity

Citi Investor Services has just published The Digital Frontier: Collateral in a Tokenized World, the third paper in its series on collateral management. I spent a decade at Citi structuring derivatives, so I read it with more than passing interest. One line stood out: tokenization, Citi writes, "does not create liquidity."

That is the argument I made in my recent article, From Derivatives to Digital: Liquidity Was Never Just About Selling the Asset. Hearing it from one of the world's largest custodians matters, because it moves the conversation from promotion to plumbing.

What Citi is saying

The paper's core claim is that tokenization has left the pilot stage and is becoming working infrastructure. Citi points to three forces arriving together:

• Production rails: banks, custodians and market infrastructure are building digital-asset capabilities into their core operations.
• On-chain money: regulated settlement assets, such as tokenized deposits, let the cash leg move on the same rails as the asset.
• Regulatory clarity: frameworks for issuance, custody and settlement are firming up, even if jurisdictions still differ.

For collateral, Citi argues three things change: settlement no longer waits for market hours, a wider range of assets becomes practical to pledge, and assets move across borders with a shared audit trail. It cites the Citi Institute's base case of a tokenized asset market of around $5.5 trillion by 2030, from roughly $17 billion today.

Just as important is what Citi does not claim. Tokenization does not change an asset's economics. What it changes is how quickly, flexibly and cheaply an eligible asset can be found, moved and delivered.

Why collateral is the right test

Collateral is where financial infrastructure gets tested hardest. Margin calls do not wait, and a missed settlement window costs real money. If tokenization works here, it works.

Citi illustrates the point with a Friday-evening margin call from a Tokyo counterparty. Under the traditional model, the call sits open over the weekend: the manager either ties up cash or carries the exposure until Monday. With a tokenized bond and on-chain settlement cash, both legs exchange as soon as the call is agreed. The bond is the same bond. What disappears is the cost of waiting.

That is exactly the distinction I drew from my own Citi years. When we hedged a client's locked-up share position with an equity collar, we did not make the shares saleable. We changed the economics of holding them while a sale was unavailable. Tokenization works in the same way. It improves the machinery around an asset: issuance, settlement, ownership records, transfer and reporting. It does not create a buyer.

For real estate, the lesson carries over directly. A tokenized building is still a building. Investors should still assess income, capital risk and exit as separate questions, and treat an asset as illiquid until a functioning market proves otherwise. What tokenization can do is make the interest easier to issue, administer, distribute and transfer to an eligible buyer when one exists.

Hybrid is the honest model

Citi is clear that this is evolution, not revolution. For the next 12 to 24 months, traditional and tokenized rails will run side by side. The goal is one optimized inventory, where an asset is tokenized when that adds value and settled conventionally when it does not, without the client needing to know which rail was used. As Citi's Global Head of Collateral Management, Eric Ilardi, puts it, tokenization "is not a separate initiative from collateral optimization. It is the next stage of it."

This is how we have built LANDHIVE. We do not ask developers or investors to abandon familiar legal structures. The SPV, the property rights and the investor protections stay. What changes are the rails underneath: onboarding, issuance, record-keeping, distributions and compliant transfers.

Those rails are provided by our infrastructure partner, Libertum, where I also serve as COO. Libertum is a registered Digital Asset Service Provider in El Salvador and a FinCEN-registered Money Services Business in the US. Its T-Suite platform lets fund managers, asset owners and developers structure, issue, distribute and manage tokenized offerings under one regulated roof. Citi's paper describes, at institutional scale, the same direction LANDHIVE and Libertum are building toward for real-world assets.

Trust is the infrastructure

The part of the paper I would most like every tokenization platform to read is its section on controls. An atomic, programmable settlement is harder to reverse than a traditional one, so the controls around it must be stronger. Citi lists four: independent review of the code, institutional-grade custody of keys, legal certainty in each jurisdiction, and a fallback to traditional settlement. In its words, trust "is part of the infrastructure itself."

This is why regulation is not a footnote. A token is only as credible as the custody, transfer and compliance arrangements behind it, and the entity accountable for them. It is also why we chose licensed rails rather than building an unregulated workaround.

The broader shift is what matters. The question is no longer whether real-world assets can be tokenized. It is whether they can operate within everyday institutional workflows, with the same standards of oversight, custody and resilience the market already expects.

When a firm of Citi's scale says tokenization is plumbing, not magic, it raises the bar for everyone. The platforms that treat it as a disciplined extension of good structuring will earn the capital. The ones still selling instant liquidity will not.

Sources

• Citi Investor Services, The Digital Frontier: Collateral in a Tokenized World, October 2026 (PDF)
• Citi Institute, Tokenization 2030: Wall Street On-Chain, June 2026, as cited in the paper above
• Jens Bezuidenhout, From Derivatives to Digital: Liquidity Was Never Just About Selling the Asset, October 2026

The views expressed are the author's own. The author is a former Citi employee and has no current affiliation with Citi; Citi has not reviewed or endorsed this article. Nothing here is investment advice or an offer of any security or digital asset.

This article is published for information only. It is not investment, legal or tax advice, and it is not an offer to sell or a solicitation to buy any security. Capital is at risk and you may get back less than you invest.