Tokenized real-world asset (RWA) marketplace Untangled Finance went live Wednesday on the Celo network after securing a $13.5 million venture capital boost to bring tokenized private credit to the blockchain, the company told CoinDesk.
The lead investor was London-based asset management firm Fasanara Capital, which has also opened two credit pools on the platform, handling off-chain operations and underwriting loans.
The development comes as asset tokenization emerged as one of the key growth opportunities in the digital asset industry, still reeling from a grueling bear market and last year’s high-profile implosions. Tokenization refers to placing traditional financial assets such as credit, real estate or bonds – so-called real-world assets – on a blockchain.
The market of tokenized assets could mushroom to $5 trillion in the next five years, bringing operational efficiencies and improving liquidity and accessibility for investors and asset managers, Bernstein said in a report earlier this year.
Read more: The Trillion Dollar Crypto Opportunity: Real World Asset Tokenization
Tokenization of private credit markets
Untangled aims to bring the traditional private credit market – currently more than $1 trillion in size – to blockchains via tokenization. The current size of private credit on decentralized finance (DeFi) rails only totals $550 million of assets, according to rwa.xyz data.
Manrui Tang and Quan Le, co-founders of Untangled, said in an interview with CoinDesk that the platform focuses on fintech lending – for example invoice financing and consumer loans based on salary advances – and so-called “green assets,” such as working capital or development loans for green infrastructure projects like battery swapping stations,
Untangled provides infrastructure to host blockchain-based credit pools, where investors – in this case, certified investors, firms, and decentralized autonomous organizations (DAOs) – deposit funds to lend and earn a yield. Depositors receive an ERC-20 token that represents their positions.
The platform brings a few novelties among RWA lending protocols, the co-founders explained. It has a built-in liquidation engine that may auction off certain collateral assets to improve the pool’s overall health if it falls below a certain threshold. The company has crafted a forward-looking credit assessment model that monitors the borrower’s future default risks. The protocol also offers an auction-based withdrawal mechanism for investors who want to exit the pools early.
“We see an upcoming merging of worlds,” Francesco Filia, CEO and CIO of Fasanara Capital, said in a statement. “On one side, fintech lending which fills the gap in underserved SME and consumer markets and, on the other, the way values are being transferred within the new world of digital assets.”