Galaxy Ventures, the venture capital arm of Galaxy Digital, has led a $20 million funding round for Fence, a startup dedicated to transforming the $6 trillion asset-backed finance market by harnessing blockchain technology to streamline back-end operations. The round also saw participation from Parafi Capital and Crane Ventures. Fence is focused on developing software to manage the operational aspects of structured credit deals, an area often plagued by fragmentation and reliance on outdated tools such as spreadsheets, PDFs, and email.
This setup not only slows down transactions but also limits investor visibility into the assets backing their investments. According to Juan Montero, co-founder and CEO of Fence, the company aims to introduce a unified system that updates data in real-time, thereby enabling lenders to continuously monitor loan performance and cash flows, rather than depending on periodic reports. Fence claims that its approach can significantly reduce costs for major asset managers. In collaboration with BBVA, one of Spain's largest banks with $800 billion in assets under management, Fence has reportedly achieved lower funding costs for borrowers and decreased operational workload while tracking large volumes of loans.
The company utilizes blockchain as a back-end infrastructure rather than a front-end product, employing smart contracts to manage cash, collateral, and deal rules without emphasizing tokens or crypto wallets to its clients. By integrating APIs and running checks through software, Fence can release cash once deal terms are met, significantly reducing the waiting period for loan data verification, report generation, and payment clearance.
Additionally, Fence can 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 ownership changes. However, tokenization is only applied where it adds tangible value.
Montero emphasized that Fence's primary objective is to build infrastructure for capital markets, distinct from merely digitizing paperwork. The company currently oversees approximately $1.5 billion in assets across its platform, working with prominent firms like BlackRock and Fortress, and can onboard new deals in weeks, compared to the months required by standard processes.
The secured funding is expected to facilitate Fence's expansion in the U.S. and further develop its product, with the goal of reshaping credit market operations through faster data processing and reduced manual steps.