A recent $20 million funding round, led by Galaxy Ventures, the venture capital arm of Galaxy Digital, is set to transform the $6 trillion asset-backed finance market by utilizing blockchain technology to overhaul outdated manual processes. The funding round, which also included investments from Parafi Capital and Crane Ventures, will support Fence, a startup that develops software to manage the operational aspects of structured credit deals. Currently, many asset managers rely on fragmented systems, including spreadsheets, PDFs, and email, to track loan pools, verify collateral, and facilitate cash movement. This setup can lead to slowed transactions and limited visibility for investors.
Fence aims to replace these 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 large asset managers. In partnership with BBVA, one of Spain's largest banks, Fence has reported lower funding costs for borrowers and reduced operational workload while tracking substantial volumes of loans.
The company's use of blockchain technology is primarily focused on back-end operations, utilizing smart contracts to manage cash, collateral, and deal terms. This approach enables Fence to pull information through APIs, run checks in software, and release cash when deal terms are met, thereby streamlining the entire process. Additionally, Fence can tokenize lender positions in financing vehicles and underlying loans or invoices, allowing 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 to the process.
With this new funding, Fence plans to expand its operations in the U.S. and further develop its product, with the goal of reshaping the credit market by providing faster data and reducing manual steps.