Untangled Finance, a leading player in the tokenized real-world asset (RWA) marketplace, recently celebrated its launch on the Celo network. This milestone was made possible thanks to a substantial $13.5 million injection of venture capital, underscoring the company’s commitment to bringing tokenized private credit to the blockchain.
The driving force behind this substantial investment is none other than Fasanara Capital, a prominent asset management firm based in London. Fasanara Capital is not just an investor; they’ve also introduced two credit pools on the platform, overseeing critical off-chain operations and underwriting loans.
Excitingly, Untangled Finance has set its sights on expanding its footprint to Ethereum (ETH) and the Layer 2 network Polygon (MATIC) through the utilization of Chainlink’s Cross Chain Interoperability Protocol. This strategic move positions the platform as a versatile, multichain, and interoperable RWA credit protocol.
In the ever-evolving landscape of the digital asset industry, asset tokenization has emerged as a prime growth opportunity. This revelation comes at a time when the industry is still recovering from a challenging bear market and the reverberations of high-profile collapses in the past year. Tokenization, in essence, involves the migration of traditional financial assets like credit, real estate, or bonds—commonly referred to as real-world assets—onto a blockchain.
Intriguingly, experts predict that the market for tokenized assets could witness explosive growth, potentially reaching a staggering $5 trillion in the next five years. This transformation promises to bring about operational efficiencies and enhance liquidity and accessibility for both investors and asset managers, as aptly highlighted in a recent report by Bernstein.
Tokenization of private credit markets
Untangled is poised to revolutionize the traditional private credit market, a behemoth exceeding $1 trillion in size, by ushering it onto the blockchain through tokenization. As of now, decentralized finance (DeFi) only accounts for a modest $550 million in private credit assets, according to rwa.xyz data.
Co-founders Manrui Tang and Quan Le, in a recent interview with CoinDesk, emphasized that their platform is geared toward fintech lending, encompassing services like invoice financing and consumer loans founded on salary advances. It also extends its reach to “green assets,” including working capital and development loans for eco-friendly infrastructure projects such as battery swapping stations. Untangled provides the essential infrastructure for hosting blockchain-based credit pools, catering to certified investors, firms, and decentralized autonomous organizations (DAOs) as lenders. In return, depositors are granted ERC-20 tokens representing their positions.
Notably, Untangled introduces several innovative features within the realm of RWA lending protocols, as explained by its co-founders. Among them is a built-in liquidation engine that can auction off specific collateral assets to bolster the overall health of the pool if it dips below a predefined threshold. Additionally, the company has devised a forward-looking credit assessment model that diligently tracks the borrower’s future default risks. The protocol further offers an auction-based withdrawal mechanism, allowing investors to exit the pools prematurely.
In the words of Francesco Filia, the CEO and CIO of Fasanara Capital, “We foresee a convergence of worlds on the horizon, where fintech lending addresses the needs of underserved SMEs and consumers while values seamlessly migrate within the new realm of digital assets.”