City Protocol has raised $11 million across seed and Pre-A financing rounds as the company expands infrastructure for bringing structured investment products on-chain.
Summary
- City Protocol raised $11 million across seed and Pre-A funding rounds.
- Dragonfly, Jump Crypto, CMT Digital and other investors backed the company.
- Venzo offers four vaults covering quantitative hedging, arbitrage, private credit and yield strategies.
- City Protocol plans to add rule-based thematic portfolios that operate directly inside user wallets.
According to City Protocol’s Aug. 26 announcement, Dragonfly, Jump Crypto, CMT Digital, Stratified Capital, Adaverse and Mirana participated in the financing alongside other investors, backing a system designed to handle the issuance, operation and distribution of blockchain-based investment products.
The company has divided its infrastructure into three parts covering tokenization, vaults, and issuance and operations. Together, the modules are designed to let asset managers and strategy providers package investment strategies into on-chain products without building the underlying infrastructure separately for each launch.
Venzo, City Protocol’s flagship platform, already hosts four strategy vaults covering quantitative hedging, cross-exchange arbitrage, private credit and on-chain yield. City Protocol said the strategies were previously offered mainly to institutional and professional investors.
Information released with the financing announcement placed Venzo’s total value locked at about $30 million, although an earlier version of the announcement cited $40 million.
City Protocol funding backs a three-layer product model
Under City Protocol’s structure, the tokenization layer converts an investment strategy or asset class into a product that can be distributed and tracked on-chain.
The vault layer handles deposits and withdrawals, execution limits, accounting and redemptions through standardized smart contracts. City Protocol’s issuance and operations layer then covers functions across the product lifecycle, including issuance records, net asset value calculations, methodology rules, rebalancing, reporting, subscriptions and redemptions.
By splitting those functions into reusable components, City Protocol said strategy providers can launch products through a common infrastructure instead of developing a new technical stack for each strategy.
Security controls are also built into the structure. City Protocol said permissions can be divided among different operational roles, while critical actions can require multisignature approval. Fees can be embedded in smart contracts and shown to users before they interact with a product, while positions and execution records remain recorded on-chain.
The model arrives as traditional financial institutions are also testing blockchain infrastructure for structured investment products. In July, crypto.news reported that HSBC had completed its first tokenized structured product issuance through a private placement for institutional investors in Hong Kong.
HSBC issued U.S. dollar-denominated structured notes with Marketnode acting as tokenization agent and digital paying agent. Marketnode handled the blockchain issuance and payment flows between the bank and the investor.
HSBC said the pilot examined whether tokenization could improve issuance, settlement, administration and servicing across the structured-product lifecycle.
City Protocol’s model targets another part of the same process, offering infrastructure that outside managers and platforms can use to create and operate different products on-chain.
Venzo turns investment strategies into vault products
Venzo provides the user-facing layer for products created through City Protocol’s infrastructure, with four strategy vaults already operating on the platform.
The current lineup includes quantitative hedging, cross-exchange arbitrage, private credit and on-chain yield strategies. After a user enters a strategy vault, the strategy operator can execute transactions within predefined limits, according to City Protocol.
Positions are valued through net asset value calculations, while exits can take place during designated redemption windows depending on the product structure.
Such a setup allows a manager to package a multi-step investment strategy into a single vault while users avoid executing each underlying trade themselves.
Private credit and other managed yield products have become a more active area of on-chain finance during 2026. Plume and Ether.fi launched a $100 million RWA vault in June, with Ether.fi allocating $100 million to a product offering access to tokenized real-world asset yield.
Plume said the vault could include institutional assets such as overcollateralized credit pools, collateralized loan obligations and bond exchange-traded funds. Ether.fi users were able to access the product directly through its application.
A month later, Plume moved similar products closer to wallet users by making its institutional yield vault available through Binance Wallet.
Eligible users could access Bitwise’s USCC crypto carry fund and Invesco’s USTB short-duration U.S. government securities product through Plume’s nBASIS vault. At the time, USCC had more than $225 million under management, while USTB held more than $950 million.
Venzo combines the same vault-based access model with crypto-native strategies, including arbitrage and quantitative hedging, alongside private-credit and yield products.
City Protocol said its infrastructure can support asset managers, strategy providers and platforms that want to issue and distribute such products without rebuilding separate vault and operations systems.
Thematic portfolios will operate inside user wallets
City Protocol is also preparing another Venzo product line that will operate differently from its managed strategy vaults.
The planned thematic portfolios will package investment ideas into rule-based baskets of underlying assets. User assets will remain in their own wallets, while automated programs execute purchases and later rebalance the portfolio according to publicly disclosed rules.
Because the assets are not pooled into a managed vault, users will directly hold the underlying assets instead of receiving a token representing a share of a portfolio.
City Protocol plans two main categories for the product.
Person-tracking portfolios will construct baskets based on holdings disclosed by prominent investors, institutions and public officials. When new disclosure data becomes available, the basket can be updated using predetermined rules.
Sector-themed portfolios will group assets around particular industries, with City Protocol listing areas including space exploration, metals and electric vehicles as potential themes.
Both formats will publish their portfolio construction rules and rebalancing schedules, according to the company. Automated execution is intended to remove the need for users to purchase every component separately or manually adjust portfolio weights when the underlying basket changes.
The planned product comes as tokenized investment products are increasingly being designed for use directly through blockchain wallets and decentralized applications.
Robinhood took that model into equities in July when it launched its blockchain alongside tokenized stock products. The Ethereum layer-2 network allowed supported tokenized equities to move across decentralized applications, while Robinhood also added lending services and other crypto products.
Robinhood’s public mainnet initially carried 95 tokenized equities, with wallet access available to eligible users across more than 120 countries.
Managed vaults also face regulatory questions
City Protocol’s strategy-vault model is entering a market where regulators are examining how existing financial rules apply when investment management moves into smart contracts.
U.S. Securities and Exchange Commission Commissioner Hester Peirce warned in July that some crypto vault structures could fall under federal securities laws depending on how they are designed and managed.
Peirce said managerial control is one factor regulators may examine, including whether an operator selects investment strategies, moves assets between opportunities or appoints people to make those decisions.
Some vaults could resemble investment contracts when users commit assets to a common enterprise while expecting returns generated through another party’s managerial work, according to Peirce. Vaults holding securities or investing user funds in securities may also have to consider investment company requirements.
On-chain lending arrangements can face similar questions depending on the structure of the loans, how products are distributed and the role played by managers, Peirce said.
The SEC plans to examine individual vault and lending structures based on their specific facts and circumstances instead of applying one classification to every on-chain product.
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