In a significant move to modernize 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. This round also saw participation from Parafi Capital and Crane Ventures. Fence is developing software to handle the operational complexities of these deals, which often involve tracking loan pools, verifying collateral, and managing cash flows. Currently, these processes are fragmented, relying on outdated methods such as spreadsheets, PDFs, and email, which can slow transactions and limit investor visibility.
Fence aims to replace these manual processes with a unified system that provides real-time updates. According to Juan Montero, co-founder and CEO of Fence, this approach enables lenders to continuously monitor loan performance and cash flows, rather than relying on periodic reports.
The company claims that its method can significantly reduce costs for major asset managers. In collaboration with BBVA, one of Spain's largest banks with $800 billion in assets, Fence has reported lower funding costs for borrowers and reduced operational workload, while efficiently tracking large volumes of loans. Unlike many blockchain-based solutions, Fence utilizes blockchain as back-end infrastructure rather than a front-end product. The company focuses on using smart contracts to manage cash, collateral, and the rules governing these deals, without emphasizing tokens or crypto wallets to its clients.
This approach allows for the automation of processes such as data checking, report generation, and payment clearance, which typically take days. Fence can also tokenize lender positions in financing vehicles and, in some cases, the underlying loans or invoices, facilitating the transfer of positions, borrowing against them, or automatic payment upon changes in ownership. However, tokenization is only applied where it adds significant value. Montero emphasized that Fence's primary goal is to build infrastructure for capital markets, rather than being perceived as a blockchain company.
While others focus on digitizing paperwork, Fence is dedicated to rebuilding the underlying infrastructure. The company currently oversees approximately $1.5 billion in assets across its platform, working with prominent firms such as BlackRock and Fortress. It can onboard new deals in mere weeks, a significant improvement over the months required by standard processes. The funding is expected to support Fence's expansion in the U.S.
and the development of its product, with the belief that enhanced data speed and reduced manual steps can fundamentally reshape the operation of credit markets.