In a significant move to modernize the $6 trillion asset-backed finance market, Galaxy Ventures, the venture capital arm of Mike Novogratz's Galaxy Digital, has led a $20 million funding round in Fence, a startup dedicated to streamlining the operational aspects of structured credit deals. The investment, which also included contributions from Parafi Capital and Crane Ventures, aims to capitalize on Fence's innovative approach to overhauling the traditionally manual and fragmented processes that underpin the credit market. By utilizing blockchain technology and tokenization in the background, Fence seeks to replace outdated methods such as spreadsheets, PDFs, and email with a unified, real-time data management system.
This novel approach enables lenders to continuously monitor loan performance and cash flows, rather than relying on periodic reports, thereby enhancing visibility and reducing transaction times. According to Juan Montero, co-founder and CEO of Fence, the company's technology has already demonstrated its potential to cut costs for major asset managers, as evidenced by its collaboration with BBVA, one of Spain's largest banks. In this partnership, Fence successfully reduced funding costs for borrowers and minimized operational workload while tracking large volumes of loans. Notably, Fence's application of blockchain is focused on back-end infrastructure rather than front-end products, using smart contracts to manage cash, collateral, and deal terms without promoting tokens or crypto wallets to banks and asset managers.
By integrating APIs, software checks, and smart contracts, Fence accelerates the traditionally slow process of loan data verification, report generation, and payment clearance. Furthermore, the company can tokenize lender positions and underlying assets, facilitating the transfer, borrowing, or automatic payment upon changes in ownership.
However, tokenization is only employed where it adds tangible value. As Montero emphasized, 'We're not seeking to be perceived as a blockchain company; rather, we're focused on building the foundational infrastructure for capital markets.' By digitizing the underlying 'plumbing' of credit markets, Fence is poised to reshape the operational landscape of the industry.
With approximately $1.5 billion in assets currently overseen across its platform, and collaborations with prominent firms like BlackRock and Fortress, Fence is well-positioned for expansion. The recent funding will support the company's growth in the U.S. market and further development of its product, driven by the conviction that enhanced data speed and reduced manual processes can fundamentally transform the inner workings of credit markets.