Venture firm ParaFi Capital is tokenizing part of its more than $1 billion of assets under management on the Avalanche AVAX
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blockchain in collaboration with the real-world asset tokenization platform Securitize.
ParaFi is a prominent investor in the crypto industry that recently raised $120 million to buy stakes in other digital asset funds. It is also one of the largest investors in real-world asset tokenization projects and infrastructure. In May, it participated in a $47 million strategic funding round for Securitize, led by BlackRock. However, the venture firm now wants to use the technology itself.
“ParaFi has been among the most active investors globally in companies focused on traditional asset tokenization. However, our firm doesn't solely want to be passive investors in this technology; we want to use it ourselves. That is why we decided to take the initial step of tokenizing a portion of our latest venture fund," ParaFi founder and Managing Partner Ben Forman said in a statement on Thursday.
"Tokenization of private market strategies can unlock streamlined settlement processes, reduce legal and administrative costs, and longer term can unlock a broad range of benefits including liquidity, programmability, and cross-margining,” Forman added.
The tokenized fund is designed to open up ParaFi’s venture strategy to a new group of investors, expanding on its existing institutional investor base, including endowments, foundations, family offices and blockchain founders. It will trade on Securitize, where investors can also leverage the platform’s borrowing and lending capabilities.
Why Avalanche?
Avalanche was selected for the tokenization process due to its Ethereum Virtual Machine compatibility, sub-second transaction finality, low fees, customizability and the network’s growing ecosystem of tokenized assets, according to the statement.
“We are proud to partner with ParaFi to tokenize a portion of its fund on the Avalanche blockchain,” Securitize co-founder and CEO Carlos Domingo said. “It’s becoming increasingly beneficial for asset managers to move their products onto public blockchains and this fund represents another evolution in the Avalanche ecosystem.”
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Last month, asset manager Franklin Templeton expanded its $419 million onchain money market fund onto the Avalanche network, in addition to Arbitrum, Polygon and Stellar. The Avalanche Foundation’s Vista initiative also allocated $50 million to purchase tokenized assets minted on the blockchain last year, incentivizing tokenization on the network.
"Financial markets demand innovation, and recently, we've seen significant leaps forward in the evolution of financial assets leveraging blockchain and tokenization as enablers for greater access and utility,” Ava Labs President John Wu said. "ParaFi and Securitize continue to innovate within the ecosystem, and I'm thrilled to see the Avalanche platform support ParaFi’s first steps into tokenizing fund interests."
Securitize’s growing tokenization portfolio
Securitize now facilitates more than $950 million in tokenized investments, including tokenizing funds for BlackRock, Hamilton Lane and KKR across asset classes.
BlackRock’s USD Institutional Digital Liquidity Fund, BUIDL, tokenized in collaboration with Securitize on Ethereum, is now the largest tokenized U.S. Treasuries fund on the market, with $515 million in assets under management.
Total assets under management in tokenized government securities, including Franklin Templeton's fund on Avalanche and other chains, now represent a more than $2 billion market, according to data compiled by asset management firm 21.co, the parent company of bitcoin exchange-traded fund provider 21Shares.
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