A recent $20 million funding round, led by Galaxy Ventures, the investment arm of Galaxy Digital, aims to transform the $6 trillion asset-backed finance market by utilizing blockchain technology to overhaul manual workflows. The funding round, which also included investments from Parafi Capital and Crane Ventures, will support Fence, a startup focused on developing software for the operational layer of structured credit deals. This layer, which encompasses tracking loan pools, verifying collateral, and managing cash flows, is often fragmented and reliant on outdated methods such as spreadsheets, PDFs, and email. Fence seeks to replace these inefficient 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 major asset managers. In partnership with BBVA, a prominent Spanish bank overseeing $800 billion in assets, Fence has reported lower funding costs for borrowers and reduced operational workload while tracking large volumes of loans. Fence'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 the company to automate manual processes, such as data verification and payment clearing, which can take days to complete.
Fence can also 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 funding, Fence plans to expand its operations in the U.S. and further develop its product, aiming to reshape the credit market by providing faster data and reducing manual steps.