Blockchain startup Intain announced a funding round from Blizzard, a venture fund that supports the Avalanche public blockchain, and JAM FINTOP Blockchain, a fund associated with community banks.
Intain started by focusing on servicing conventional loan securitizations and in 2020, partnered with the fourth-biggest trustee in the asset-backed securities sector, WSFS Institutional Services. Currently, almost $5 billion in assets are administered on the Intain ADMIN platform. Now it’s additionally planning to launch a tokenization service.
Solving a pain point
The blockchain solution solves a major pain point in servicing these securities, which must be administered for between seven and 15 years. Despite the passage of almost 15 years since the Great Financial Crisis, there is no major centralized service for monitoring and reporting how each loan in a pool is performing. This implies that the participants in securitizations don’t want to rely on a centralized entity.
As a result, the reporting is usually at least six weeks in arrears and the servicing is costly in terms of human resources.
On top of this, most securitizations have many different classes of investors split by risk appetite, making the reporting more complex.
Apart from the different types of investors, there are several participants, such as the lender, the servicer for loan payments, the trustee, the issuer, and the rating agency. It’s the classic need for a single ‘source of truth’.
The Intain ADMIN solution automates most of the servicing process. Hence, instead of having a minimum securitization transaction size of $100 million, it’s now viable to have a transaction a tenth of the size.
“The fact that some of the intermediaries in the industry are willing to share up to 50% of their fees with us means that at least 70-80% of the transaction has to get automated,” said Siddhartha, Founder and CEO of Intain during a Hyperledger presentation.
The Intain ADMIN solution is based on Hyperledger Fabric. But it has been cloned onto Avalanche to launch a tokenization service, Intain MARKETS for asset backed securities (ABS).
“We are neither creating a new asset class nor do we offer 15% APY risk-free returns,” said Siddhartha, in a nod to the claims by some now-bankrupt crypto lenders. “We are building a transparent and efficient version of the existing financial system.”
Avalanche was selected because of its DeFi focus and sub network (subnet) architecture which support permissioned spaces that restrict access to financial institutions.
“Each Subnet can be tailored to the precise needs of the application, including tweakable gas fees, economics, validator sets, KYC requirements, and much more,” said Lydia Chiu, VP of Business Development at Ava Labs, on behalf of the Blizzard Fund.
Meanwhile, Intain is not the only one focused on securitizations. Figure Technologies has issued asset-backed securities using its Provenance blockchain with Intain client WSFS acting as trustee. Last week, Redwood Trust’s CoreVest announced a $313 million loan securitization with loan payments tracked using blockchain technology from Liquid Mortgage. And Symbiont has developed an asset-backed securities platform developed with Vanguard.
