Untangled Finance secures €12.74M to bring tokenised private credit on-chain

Untangled Finance, a London fintech company, has secured $13.5M (€12.74M) in funding to bring tokenised private credit, with a built-in liquidation mechanism, on-chain. 

The company will use the capital for product development, ecosystem growth, and other initiatives. Fasanara Capital, a London-based fintech investment platform and lending pioneer, led the investment round.

Untangled was founded in 2020 by experts in finance, asset origination, and emerging markets. Its platform focuses on tokenising real-world private credit assets, such as invoices and SME loans with a total of $1T in size, into on-chain structured credit pools. Then, these pools issue collateralised debt notes to DeFi and TradFi investors. 

Untangled’s protocol can offer access to institutional-grade assets from 130+ verified asset originators in 60+ countries through its partnership with Fasanara. Investors can choose originator-specific or automated lending pools depending on their risk appetite. This makes capital more accessible and fairly priced.

“The Untangled team has a rare combination of being rooted in real-world finance and yet has acquired deep expertise in blockchain and DeFi,” says Francesco Filia, CEO and CIO of Fasanara Capital.

“We are looking forward to working with Untangled to engineer these entirely new financial rails so, for the first time, being able to handle users at scale,” adds Filia. 

Why tokenise RWAs

Tokenisation leverages blockchain technology to bring traditional assets (known as Real World Assets or RWAs) onto blockchain platforms. Tokenised RWAs enable fractional ownership, facilitating borderless access and lowering investment barriers. This is especially helpful to SMEs that are struggling with information asymmetry.

RWAs also enhance transparency and security regarding asset performance while maintaining an immutable transaction history record. 

“Together with institutional-grade assets, we hope to contribute to the RWA ecosystem by further developing its liquidation infrastructure that will help this new market to scale,” says Quan Le, Untangled Finance’s co-founder.

New financial tool for the market

RWAs started as new collateral for investors when crypto interest lowered in the 2022/23 bear market. It provides stable returns for DeFi investors at scale. However, RWAs in private credit are illiquid, unlike crypto. This means there is no secondary market for these assets, making it difficult to trade them and limiting investors’ exit options.

Untangled solves this issue by offering an RWA liquidation framework and a liquidity safeguard to boost investor confidence. If the quality of loans in an asset pool deteriorates, the liquidation process will be triggered. At this point, any collateral would be auctioned to revitalise the pool.

On the other hand, when assets are performing, and investors would like to exit for liquidity reasons, the protocol facilitates an on-chain Dutch auction that helps new investors take over the exited portion.

Untangled is also developing a forward-looking credit assessment model using machine learning to evaluate a borrower’s future default risks. This model will consider previous loan behaviours, borrower standing, and critical macroeconomic indicators. Investors can access an interactive dashboard to help them make more informed investment decisions.

“Since 2017, our focus has been on real-world asset tokenisation where we see growing interest,” says Manrui Tang, Untangled Finance’s co-founder.

“Our partnership with Fasanara is a step towards developing reliable DeFi yield mechanisms, broadening the investment possibilities in crypto but also helping to mitigate its inherent volatilities, all while striving to make finance more accessible around the world,” adds Tang.

Untangled Finance will launch in early October on the Celo blockchain. It will also be expanded to Polygon and Ethereum using Chainlink’s Cross Chain Interoperability Protocol (CCIP), making it one of the first multichain and interoperable real-world asset (RWA) credit protocols.