A recent $20 million funding round, spearheaded by Galaxy Ventures, aims to transform the $6 trillion asset-backed finance market by harnessing blockchain technology. This market, where numerous deals still rely on manual workflows, is poised for disruption.

The funding round, which also included investments from Parafi Capital and Crane Ventures, will support Fence, a startup developing software to manage the operational aspects of structured credit deals. This operational layer, encompassing tasks such as tracking loan pools, verifying collateral, and facilitating cash movement, is often fragmented and reliant on outdated methods like spreadsheets, PDFs, and email. Fence seeks to replace these processes with a unified system that provides real-time data updates.

According to Juan Montero, Fence's co-founder and CEO, this approach enables lenders to continuously monitor loan performance and cash flows, rather than relying on periodic reports. The company claims that this method can reduce costs for major asset managers, citing its work with BBVA, one of Spain's largest banks, which oversees $800 billion in assets.

Fence's use of blockchain is primarily focused on back-end operations, utilizing smart contracts to manage cash, collateral, and deal terms without promoting tokens or crypto wallets to banks and asset managers. In a typical facility, lenders often wait days for loan data to be verified, reports to be generated, and payments to be processed. Fence streamlines this process by pulling information through APIs, conducting checks via software, and employing smart contracts to release cash when deal terms are met.

The company can also tokenize lender positions in financing vehicles and, in some cases, the underlying loans or invoices, enabling investors to transfer positions, borrow against them, or receive payments automatically in the event of ownership changes. However, tokenization is only used when it adds value.

Montero emphasized that Fence is focused on building infrastructure for capital markets, rather than being perceived as a blockchain company. The company currently oversees approximately $1.5 billion in assets across its platform, working with firms like BlackRock and Fortress, and can onboard new deals in weeks, compared to months under standard processes. The funding will facilitate the company's expansion in the U.S.

and product development, with the goal of reshaping the credit market's operational framework through faster data processing and reduced manual steps.