A recent $20 million investment round, spearheaded by Galaxy Ventures, aims to transform the $6 trillion asset-backed finance market by harnessing blockchain technology. This market, where many transactions still rely on manual processes, is poised for disruption. Fence, the recipient of the funding, is developing software to streamline the operational aspects of structured credit deals. The current system, which involves tracking loan pools, verifying collateral, and managing cash flows, is often fragmented and reliant on outdated methods such as spreadsheets, PDFs, and email.
This can lead to slowed transactions and limited visibility for investors. Fence seeks to replace these inefficient processes with a unified system that provides real-time updates. According to Juan Montero, co-founder and CEO of Fence, this approach enables lenders to continuously monitor loan performance and cash flows, rather than relying on periodic reports.
The company claims that its approach can reduce costs for major asset managers. In collaborations with BBVA, a prominent Spanish bank overseeing $800 billion in assets, Fence has reported lower funding costs for borrowers and decreased operational workload while tracking large volumes of loans.
Fence utilizes blockchain as a back-end solution, rather than a front-end product. The company does not promote tokens or crypto wallets to banks and asset managers.
Instead, it employs smart contracts to manage cash, collateral, and deal terms behind the scenes. In a typical facility, lenders may experience delays of several days while awaiting loan data verification, report generation, and payment clearance. Fence streamlines this process by pulling information through APIs, running checks in software, and using smart contracts to release cash when deal terms are met. The company can also tokenize lender positions in financing vehicles and, in some cases, the underlying loans or invoices, facilitating the transfer of positions, borrowing against them, or automatic payment upon ownership changes.
However, tokenization is only used when it adds value. As Montero stated, 'We don't want to be perceived as a blockchain company; we're building the infrastructure for capital markets.' The company has made significant progress, overseeing approximately $1.5 billion in assets across its platform, and collaborating with prominent firms such as BlackRock and Fortress.
It can onboard new deals in a matter of weeks, compared to the months required by standard processes. The funding is expected to support the company's expansion in the U.S. and further development of its product, with the goal of reshaping the credit markets through faster data processing and reduced manual steps.