In a significant move to transform 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 for Fence, a startup developing software to handle the operational aspects of structured credit deals. This round, which also included investments from Parafi Capital and Crane Ventures, aims to utilize blockchain technology to overhaul the market's back-end operations.
The current system, which involves tracking loan pools, verifying collateral, and managing cash flows, is often fragmented and relies on manual workflows, leading to slowed transactions and limited visibility for investors. Fence seeks to replace these outdated processes with a single, real-time system.
According to Juan Montero, co-founder and CEO of Fence, this approach can significantly reduce costs for large asset managers. Fence has already demonstrated the effectiveness of its approach in deals with BBVA, one of Spain's largest banks, overseeing $800 billion in assets. By leveraging blockchain technology, Fence has reported lower funding costs for borrowers and reduced operational work while tracking large volumes of loans. The company's use of blockchain is primarily focused on back-end operations, utilizing smart contracts to manage cash, collateral, and deal terms, rather than promoting tokens or crypto wallets.
This approach enables lenders to monitor loan performance and cash flows continuously, rather than relying on periodic reports. Fence's platform has already overseen approximately $1.5 billion in assets, working with prominent firms such as BlackRock and Fortress. The recent funding will facilitate the company's expansion in the U.S. and further development of its product, with the goal of reshaping the credit market's back-end operations through faster data processing and reduced manual steps.