Capital markets News

Securitize to launch lending service using tokenized assets as collateral

Securitize Credit

Tokenization firm Securitize announced the launch of a new subsidiary, Securitize Credit. The Morgan Stanley-backed startup is best known for tokenizing KKR and Hamilton Lane funds. However, it offers a wide array of services relating to asset tokenization, including a FINRA-registered secondary market.

A new subsidiary will run a Securitize Earn program, enabling cryptocurrency holders to lend it stablecoins and tokens such as Bitcoin and ETH. 

In turn its Securitize Credit subsidiary will use the funds to grant over-collateralized loans to borrowers who provide collateral in the form of private assets, including digital securities. Some borrowers might enter into repurchase agreements (repo) rather than loans. In other words, people will sell their private assets to Securitize Credit with an agreement to buy it back in a month or three at a marginally higher price.

The loans granted will provide the borrower with USDC stablecoins. We wondered what Securitize would do with the crypto received in the rewards program to transform it into USDC in a low risk manner. We asked Securitize but didn’t get a response before publication.

“Traditional on-chain collateral and credit opportunities often lack quality, while DeFi remains inaccessible, especially for institutional investors. On-chain yields, although promising, are hindered by low risk-adjusted returns and restricted access to high-quality income-generating digital securities,” said Securitize Co-Founder and CEO Carlos Domingo.

“Securitize Credit addresses these limitations by making over-collateralized loans underpinned by the highest-quality assets issued and managed by Wall Street’s top private asset managers.”

Tokenization and tip-toeing through U.S. legal hurdles

The Earn program is already live, but the lending side will launch before the end of June. Generally, Securitize has operated regulated services out of the United States, although it has subsidiaries such as one in Japan. 

However, in the case of the rewards program, its subsidiary SC Credit Rewards is based in the British Virgin Islands. The Earn program is not available in the United States or certain other jurisdictions such as Canada, Italy and Japan. 

The lending program that uses tokenized real world assets (RWA) as collateral will be operated by a separate subsidiary, Securitize Credit.

Meanwhile, last year Securitize acquired OnRamp Invest, a wealth management startup targeting financial advisors that offer cryptocurrency services to clients. At the time of the acquisition, it serviced more than 300,000 accredited investors. Overall Securitize has more than 500,000 investors.

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