Digital asset management firm ParaFi Capital has taken its first step into fund tokenization by offering a minority stake in its latest venture capital fund on the Avalanche blockchain.
According to a Sept. 12 Bloomberg report, the firm’s $1.2-billion fund will be partially tokenized and available for trading through the Securitize platform, marking a move toward integrating blockchain technology into traditional asset management.
“We decided we want to eat our own dog food,” said ParaFi founder Ben Forman. “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 Securitize and Avalanche. In August, it closed a $120-million fundraising from several investors, including Theta Capital Management and Accolade Partners.
Tokenizing a fund means 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.
Among its benefits, tokenization lowers the barriers to entry, allowing more people to participate in investment opportunities that were previously reserved for large institutional or wealthy investors.
Tokenized securities as of Sept. 11. Source: SteakHouse/Dune Analytics
Investment managers are increasingly exploring the intersection between funds and blockchain technology. BlackRock, for instance, 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, BUILD has a market capitalization of $514 million at the time of writing, 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 have reached $5 trillion by 2030.
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