In a significant funding round, Galaxy Ventures, the venture capital arm of Galaxy Digital, has led a $20 million investment in Fence, a startup dedicated to transforming the $6 trillion asset-backed finance market. The funding round, which also included Parafi Capital and Crane Ventures, will support Fence's mission to utilize blockchain technology to streamline the operational layer of structured credit deals.
This layer, which encompasses tracking loan pools, verifying collateral, and managing cash flows, is often fragmented and reliant on manual processes, resulting in slowed transactions and limited visibility for investors. Fence aims to replace these outdated processes with a unified system that provides real-time updates, enabling lenders to continuously monitor loan performance and cash flows. According to Juan Montero, co-founder and CEO of Fence, this approach can significantly reduce costs for major asset managers.
In partnership with BBVA, one of Spain's largest banks, Fence has reported lower funding costs for borrowers and reduced operational workload while tracking large volumes of loans. Rather than promoting blockchain as a front-end product, Fence utilizes it as back-end infrastructure, leveraging smart contracts to manage cash, collateral, and deal terms.
By integrating APIs, software checks, and smart contracts, Fence can facilitate faster and more efficient transactions. The company has also tokenized lender positions in financing vehicles and underlying loans or invoices, allowing for the transfer, borrowing, or automatic payment of positions. However, tokenization is only employed where it adds value. Fence's primary focus is on building infrastructure for capital markets, rather than simply digitizing paperwork.
With the new funding, the company plans to expand its presence in the U.S. and further develop its product, with the goal of reshaping the credit market through enhanced data management and reduced manual processes.
Currently, Fence oversees approximately $1.5 billion in assets across its platform, working with prominent firms such as BlackRock and Fortress, and can onboard new deals in a matter of weeks, compared to the standard process which takes months.