A recent $20 million funding 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 workflows, is poised for disruption. The funding round, which also included investments from Parafi Capital and Crane Ventures, will support Fence, a startup dedicated to developing software for the operational aspects of structured credit deals.
Currently, these operations - including tracking loan pools, verifying collateral, and managing cash flows - are often fragmented across multiple firms and reliant on outdated tools such as spreadsheets, PDFs, and email. This setup can impede transactions and limit investor visibility into the assets backing their investments.
Fence seeks to replace these processes with a unified system that updates data in real time. According to Juan Montero, co-founder and CEO of Fence, lenders can continuously monitor loan performance and cash flows, rather than relying on periodic reports. The company claims that this approach can reduce costs for major asset managers. In collaborations with BBVA, one of Spain's largest banks with $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, leveraging smart contracts to manage cash, collateral, and deal terms without promoting tokens or crypto wallets to banks and asset managers. By integrating APIs, running checks in software, and using smart contracts to release cash when deal terms are met, Fence streamlines the process. 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 employed where it adds value.
As Montero emphasized, 'We don't want to be seen as a blockchain company. We're building the infrastructure for the capital markets.' The company currently oversees approximately $1.5 billion in assets across its platform, working with firms like BlackRock and Fortress, and can onboard new deals in weeks, compared to months under standard processes. The funding will enable the company to expand in the U.S. and further develop its product, betting that enhanced data efficiency and reduced manual steps can reshape the credit market's operational landscape.