According to Cointelegraph, digital asset management firm ParaFi Capital has initiated its first foray into fund tokenization by offering a minority stake in its latest venture capital fund on the Avalanche blockchain. The firm's $1.2 billion fund will be partially tokenized and available for trading through the Securitize platform, marking a significant step toward integrating blockchain technology into traditional asset management.
ParaFi founder Ben Forman stated, 'We decided we want to eat our own dog food. We are investors in this technology, but we didn’t just want to invest in the tokenization infrastructure, we wanted to use it ourselves.' ParaFi has invested in both Securitize and Avalanche. In August, the firm closed a $120 million fundraising round from several investors, including Theta Capital Management and Accolade Partners.
Tokenizing a fund involves converting ownership interests or shares into digital tokens that are stored and managed on a blockchain. Each token represents a fraction of ownership in the underlying asset, allowing these tokens to be bought, sold, or traded on digital platforms. This process lowers the barriers to entry, enabling more people to participate in investment opportunities that were previously reserved for large institutional or wealthy investors.
Investment managers are increasingly exploring the intersection between funds and blockchain technology. For instance, BlackRock launched its BlackRock USD Institutional Digital Liquidity Fund (BUIDL) on the Ethereum blockchain in 2023. The fund tokenizes traditional financial instruments, such as US Treasurys, cash, and repurchase agreements. According to data available on Dune Analytics, BUIDL has a market capitalization of $514 million, with a 30.76% market share among similar funds onchain. As of Sept. 11, over $1.6 billion in securities had already been tokenized, an increase of 11% over the past 30 days. Global bank Citi forecasts that the tokenization market will reach up to $5 trillion by 2030.
