ParaFi Capital has partnered with Securitize, a real-world asset tokenization platform, to tokenize a portion of its more than $1 billion in assets under management on the Avalanche blockchain.
The firm, known for its substantial investments in the crypto industry, is also a leading investor in projects and infrastructure focused on real-world asset tokenization.
Earlier this year, ParaFi participated in a $47 million funding round for Securitize, led by global asset manager BlackRock.
Tokenization Offers Major Benefits
Ben Forman, founder and managing partner of ParaFi, noted the potential benefits of tokenizing private market strategies, which include streamlined settlement processes and reduced legal and administrative costs.
He also claimed that tokenization offers improved liquidity, programmability, and cross-margining in the long term.
“ParaFi has been among the most active investors globally in companies focused on traditional asset tokenization,” Forman said.
“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.”
Tokenization meets private markets
Alternative asset management firm with $1B+ in AUM expands its L1 blockchain footprint.
ParaFi has tapped Securitize, a tokenization giant managing $950M+ in investments, to tokenize an interest in one of its venture funds on Avalanche.… pic.twitter.com/zn0D3r8Kuf— Avalanche
(@avax) September 12, 2024
The tokenized fund will be traded on the Securitize platform, providing investors with borrowing and lending options while also expanding ParaFi’s reach to a broader range of investors beyond its existing institutional base.
Avalanche was chosen for this tokenization initiative due to its Ethereum Virtual Machine compatibility, sub-second transaction finality, low fees, and a growing ecosystem of tokenized assets.
“We are proud to partner with ParaFi to tokenize a portion of its fund on the Avalanche blockchain,” said Carlos Domingo, co-founder and CEO of Securitize.
Avalanche’s Tokenization Ecosystem Grows
Avalanche’s tokenization ecosystem has been growing, with notable developments such as Franklin Templeton’s $419 million on-chain money market fund expansion onto the network.
Additionally, the Avalanche Foundation’s Vista initiative allocated $50 million to incentivize the tokenization of assets on the platform.
“Financial markets demand innovation, and recently, we’ve seen significant leaps forward in the evolution of financial assets leveraging blockchain and tokenization,” John Wu, president of Ava Labs, said.
Securitize, which now facilitates over $950 million in tokenized investments, has previously worked with major players like BlackRock and KKR.
BlackRock’s USD Institutional Digital Liquidity Fund, tokenized in partnership with Securitize on Ethereum, now holds $515 million in assets, making it the largest tokenized U.S. Treasuries fund.
McKinsey & Company recently reported that tokenized financial assets have had a “cold start” but are still expected to grow to a $2 trillion market by 2030.
Meanwhile, a report by the Global Financial Markets Association (GFMA) and Boston Consulting Group estimates the global value of tokenized illiquid assets will reach $16 trillion by 2030.
Even more conservative estimates from Citigroup suggest that $4 trillion to $5 trillion worth of tokenized digital securities could be minted by 2030.
Recognizing this potential, major companies are making significant moves in the tokenization space.
Goldman Sachs, for instance, plans to launch three new tokenization products later this year, driven by growing client interest.
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