In a bid to transform the $6 trillion asset-backed finance market, Galaxy Ventures, the venture capital arm of Galaxy Digital, has led a $20 million funding round for Fence, a startup focused on developing software for the operational layer of structured credit deals. The round also saw participation from Parafi Capital and Crane Ventures.
Fence aims to overhaul the traditional, fragmented, and often manual processes involved in tracking loan pools, verifying collateral, and managing cash flows. By utilizing blockchain technology and tokenization in the background, Fence seeks to provide a single, unified system that updates data in real time, thereby enhancing transaction efficiency and providing investors with greater visibility into the assets backing their investments.
According to Juan Montero, co-founder and CEO of Fence, the company's approach can significantly reduce costs for major 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. The company's use of blockchain is primarily focused on back-end processes, leveraging smart contracts to manage cash, collateral, and deal terms, rather than promoting tokens or crypto wallets as a front-end product. By automating these processes, Fence enables lenders to continuously monitor loan performance and cash flows, eliminating the need for periodic reports.
The company's technology can also tokenize lender positions in financing vehicles and underlying loans or invoices, facilitating the transfer of positions, borrowing against them, or receiving payments automatically in the event of ownership changes. However, Montero emphasized that tokenization is only employed where it adds value. With this funding, Fence plans to expand its operations in the U.S.
and further develop its product, with the goal of reshaping the credit markets through faster data processing and reduced manual steps. Currently, Fence oversees approximately $1.5 billion in assets across its platform, working with prominent firms such as BlackRock and Fortress, and can onboard new deals in a matter of weeks, compared to the months required by standard processes.