1. Why Solana?
Citibank chooses Solana over Ethereum, mainly focusing on its high performance and low cost:
- High throughput: Solana can process thousands of transactions per second, meeting the high-frequency trading demands of traditional finance.
- Low fees: Transaction costs are extremely low, suitable for trade finance scenarios that require frequent transfers or splitting of assets.
- State compression: This technology allows for a large amount of data to be compressed and stored on-chain, significantly reducing on-chain issuance and maintenance costs.
2. The value of tokenization
Converting letters of credit, invoices, and other assets into digital tokens aims to address the pain points of traditional trade finance:
- Improving Efficiency: Shortening manual review and paper circulation processes (typically taking 5-10 days), with smart contracts able to automatically execute payments, achieving atomic instant settlement.
- Enhanced Liquidity: Splitting and securitizing trade assets with poor liquidity allows more investors to participate and revitalizes dormant assets.
- Increased Transparency: The distributed ledger of blockchain allows all participants (importers, exporters, banks, logistics) to share data in real-time, reducing information asymmetry and fraud risks.
3. Industry Pattern Preview
This validation provides an important reference for future financial forms:
- Evolution of the Bank's Role: Banks may transition from being mere 'intermediaries' to 'digital asset guarantors' or 'smart contract service providers.'
- Compliance Dawn for Public Chains: Large banks beginning to use public chains indicate that the technology is no longer being rejected. In the future, there may emerge 'permissioned public chains' that only allow authorized nodes to participate.
- RWA (Real World Assets) Trend: This is an important development in the RWA track. Once successful, more assets such as stocks and bonds can be brought onto the chain, connecting traditional finance with DeFi (Decentralized Finance).
I. Core of the Event
• From February to March 2026, Citibank, in collaboration with PwC, completed PoC for bill tokenization on Solana, covering the entire process of issuance, circulation, and settlement; conducted in a controlled environment, without involving real customer funds.
• Mechanism: Converting bills into on-chain tokens, embedding metadata such as amount, maturity date, counterparties, etc.; suppliers can sell tokenized receivables at a discount to banks, enabling digital transfers and atomic settlements between institutions.
II. Why Choose Bills and Solana
• Pain Points of Bills: Traditional process cycles are long, manual costs are high, fraud risks are significant, and reconciliation is complex, especially in cross-border scenarios.
• Advantages of Solana: High TPS, low fees, second-level confirmations, aligning with high-frequency small-value trade settlement needs; Citibank values performance and integration capabilities more than decentralization purity.
III. Value and Breakthrough
1. Efficiency Revolution: On-chain processes compressed to hours/minutes, replacing the traditional days-long cycle; smart contracts automatically execute, reducing manual input and errors.
2. Cost Optimization: Reducing costs of intermediary banks, manual verification, and compliance, with transaction fees significantly lower than traditional cross-border settlements.
3. Risk Reduction: Immutable ledger + transparent traceability reduces forgery and duplicate financing; DvP atomic settlement avoids delivery risks.
4. Market Expansion: Providing more convenient financing channels for small and medium-sized enterprises, activating the trillion-level trade financing market liquidity.
IV. Challenges and Limitations
1. Compliance and Regulation: Cross-border trade involves multiple legal jurisdictions, and the legal status of tokenized assets, KYC/AML, and tax rules remain to be clarified.
2. Technology and Security: The historical stability issues of Solana need continuous validation; smart contract vulnerabilities, private key management, and data privacy are key risk points.
3. Ecological Collaboration: Requires the participation of multiple entities such as traders, banks, and insurance companies; inconsistent standards and high system integration costs.
4. Trust Migration: The establishment of trust in blockchain by traditional institutions takes time, and there is still a distance from PoC to large-scale commercial use.