A recent $20 million funding round, spearheaded by Galaxy Ventures, the venture capital arm of Galaxy Digital, is set to transform the $6 trillion asset-backed finance market by harnessing blockchain technology. The investment, which also included Parafi Capital and Crane Ventures, will support Fence, a startup dedicated to developing software for the operational aspects of structured credit deals. Currently, this layer of the market, which encompasses tracking loan pools, verifying collateral, and facilitating cash movement, is often fragmented and reliant on outdated methods such as spreadsheets, PDFs, and email. This can result in slowed transactions and limited visibility for investors into the assets backing their investments.
Fence aims to replace these processes with a unified system that provides real-time data updates. 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 lead to cost savings for major asset managers. In partnership with BBVA, one of Spain's largest banks with $800 billion in assets, Fence has reported reduced funding costs for borrowers and decreased operational workload while tracking large volumes of loans.
Fence utilizes blockchain as a back-end infrastructure 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. Typically, lenders may experience delays of several days for 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. 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 automatic payments in the event of ownership changes.
However, tokenization is only used when it adds value. Montero emphasized that Fence is focused on building infrastructure for capital markets, rather than being perceived as a blockchain company.
While others may digitize paperwork, Fence has rebuilt the underlying plumbing. The company currently oversees approximately $1.5 billion in assets across its platform, working with firms such as BlackRock and Fortress, and can onboard new deals in weeks, compared to months under standard processes. 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 markets through faster data and reduced manual steps.