In a significant move to overhaul the $6 trillion asset-backed finance market, Galaxy Ventures, the venture capital arm of Galaxy Digital, has led a $20 million funding round in Fence, a startup dedicated to transforming the operational layer of structured credit deals. The investment, which also included contributions from Parafi Capital and Crane Ventures, aims to harness the power of blockchain technology to automate manual processes that have long hindered the efficiency of the credit market. Fence's innovative approach focuses on developing a unified system that updates data in real-time, thereby replacing the traditional, fragmented methods that rely on spreadsheets, PDFs, and email.
This streamlined process enables lenders to continuously monitor loan performance and cash flows, rather than relying on periodic reports. According to Juan Montero, co-founder and CEO of Fence, the company's technology has the potential to significantly reduce costs for major asset managers. In collaboration with BBVA, one of Spain's largest banks, Fence has successfully demonstrated the effectiveness of its approach, resulting in lower funding costs for borrowers and reduced operational workload.
Notably, Fence'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 as a front-end product. By leveraging APIs, software checks, and smart contracts, Fence can facilitate the rapid release of cash when deal terms are met, thereby minimizing the delays often associated with traditional loan data processing. Furthermore, the company can tokenize lender positions in financing vehicles, as well as the underlying loans or invoices, to enable the seamless transfer of positions, borrowing against them, or automatic payment upon changes in ownership. However, tokenization is only employed where it adds tangible value.
As Montero emphasized, Fence's primary objective is to establish itself as a key infrastructure provider for the capital markets, rather than being perceived solely as a blockchain company. By rebuilding the underlying plumbing of the credit market, Fence is poised to revolutionize the way credit markets operate, with a current oversight of approximately $1.5 billion in assets across its platform, and collaborations with prominent firms such as BlackRock and Fortress.
The recent funding will enable the company to expand its presence in the U.S. and further develop its product, with the ultimate goal of reshaping the credit market through faster data processing and reduced manual steps.