A recent $20 million funding round, spearheaded by Galaxy Ventures, the investment arm of Galaxy Digital, is set to transform the $6 trillion asset-backed finance market by harnessing blockchain technology to streamline processes. The funding round, which also included investments from Parafi Capital and Crane Ventures, will support Fence, a startup focused on developing software for the operational aspects of structured credit deals. Currently, the operational layer, encompassing tasks such as tracking loan pools, verifying collateral, and managing cash flows, is often fragmented and reliant on manual processes, including spreadsheets, PDFs, and email.
This can lead to delayed transactions and limited visibility for investors. Fence aims to replace these inefficient 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 collaboration with BBVA, one of Spain's largest banks, overseeing $800 billion in assets, Fence reported lower funding costs for borrowers and reduced operational workload while tracking large volumes of loans.
Unlike other companies, Fence utilizes blockchain as a back-end solution, rather than a front-end product, to manage cash, collateral, and deal terms. The company does not promote tokens or crypto wallets to banks and asset managers; instead, it employs smart contracts to facilitate these processes. Typically, 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, performing checks in software, and utilizing smart contracts to release cash when deal terms are met.
Additionally, the company can tokenize lender positions in financing vehicles and, in some cases, the underlying loans or invoices, enabling investors to transfer positions, borrow against them, or receive payments automatically in the event of ownership changes. However, tokenization is only used when it adds significant value. As Montero emphasized, 'We don't want to be perceived as a blockchain company; we're building the infrastructure for the capital markets. Others digitize paperwork, while Fence rebuilds the underlying plumbing.' The company currently oversees approximately $1.5 billion in assets across its platform, collaborating with firms such as BlackRock and Fortress, and can onboard new deals in a matter of weeks, compared to the standard process which takes months.
The funding will enable the company to expand its presence in the U.S. and further develop its product, with the goal of reshaping the credit market's operational framework through faster data processing and reduced manual steps.