DEFYCA, a digital securities platform based in Luxembourg, informed that they will launch their tokenized private credit protocol on the testnet of the Avalanche blockchain this month, with a planned mainnet launch scheduled for late July.
DEFYCA claims to be the initial organization to provide digital securities to professional investors in compliance with the European Union’s upcoming MiCA legislation for cryptocurrency and the blockchain regulations of Luxembourg.
The news has been released as cryptocurrency and traditional finance are being mixed together in the decentralized finance (DeFi) sphere, with protocols providing tokenized versions of real-world assets (RWA) such as bonds and credit on blockchain networks for investors. Private debt funds, which DEFYCA is looking to introduce to Avalanche, oversee $1.6 trillion worth of resources according to Broadridge’s report.
BCG and ADDX have predicted that the asset tokenization industry will become a $16.1 trillion market by 2030.
“Moving real-world assets and off-chain collateral on-chain is critical to the evolution of DeFi, and making the risk profile of these applications more robust.”
– Morgan Krupetsky, director of business development and institutions at Ava Labs
Tokenized real-world assets
DEFYCA is joining other protocols that mix blockchain-based decentralized finance and the usual financial systems to attract institutional investors who are looking for investments that bring in income.
In early 2020, Ondo Finance began offering digital versions of government and corporate bonds, and Maple Finance established a pool for lending against tax receivables. Additionally, JPMorgan’s Onyx protocol had processed more than $300 billion in intra-day repurchase agreements by November.
Tokenized assets will be created and organized into liquid pools, allowing investors to utilize algorithmic strategies for trading. As the functions of debt issuance such as liability matching, settlement, payment processes and price identification are accomplished by smart contracts automatically, the process is more efficient and cost-effective than in traditional markets, according to the protocol.
Investors can put money into the protocol either in the form of Circle’s USDC and EUROC stablecoins or real-world currency, with Citi acting as the guardian of the funds.
At its outset, DEFYCA has created two investment funds for utilization: a €100 million (approx. US$105 million) loan fund that is aimed at mid-sized businesses in Europe and a larger digital feeder infrastructure fund of around $200 million.
“There is a strong pipeline of circa $1 billion of issuances over the next 18 to 24 months.”
– spokesperson of the protocol
DEFYCA secured $1.3 million in venture capital during a seed round in November, with the investment coming from tech-focused fund QBN Capital and Blizzard Fund, a venture capital firm associated with Avalanche.
