Galaxy Ventures, the venture capital division of Galaxy Digital, has led a $20 million investment round in Fence, a company developing software to streamline the operational aspects of structured credit deals. This funding round, which also included investments from Parafi Capital and Crane Ventures, aims to transform the $6 trillion asset-backed finance market by utilizing blockchain technology to replace traditional manual workflows.
Fence's platform focuses on the operational layer of these deals, which encompasses tasks such as tracking loan pools, verifying collateral, and managing cash flows. By consolidating these processes into a single system that provides real-time updates, Fence seeks to increase the speed of transactions and provide 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.
In collaboration with BBVA, one of Spain's largest banks, Fence has successfully lowered funding costs for borrowers and decreased operational workload while continuously monitoring large volumes of loans. Rather than promoting blockchain as a front-end product, Fence utilizes it as back-end infrastructure, employing smart contracts to manage cash, collateral, and deal terms.
This approach enables lenders to monitor loan performance and cash flows in real-time, rather than relying on periodic reports. Fence has chosen to use tokenization judiciously, primarily where it adds value, such as in the tokenization of lender positions in financing vehicles or underlying loans and invoices. This allows investors to transfer positions, borrow against them, or receive payments automatically in the event of ownership changes.
With this investment, Fence plans to expand its presence 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.