DeFi infrastructure provider AllianceBlock is changing the dynamics for crypto startups seeking funding through a unique partnership with ABO Digital, the digital asset investment arm of Alpha Blue Ocean. The collaboration will enable crypto projects to seek alternative funding by issuing fully-compliant tokenized structured products to their financial backers.
Until now, crypto projects have been limited in their financing options, and usually obtain liquidity by issuing tokens to market makers and early investors. AllianceBlock and ABO Digital will provide them with the ability to tokenize traditional financial instruments and wrap them up as traditional Actively Managed Certificates, or AMCs, which can then be offered to capital providers that don’t want to hold digital tokens.
ABO Digital’s role in the partnership is to negotiate and structure financial instruments on behalf of crypto projects, based on their capital needs and liquidity requirements. AllianceBlock, meanwhile, will leverage its Nexera Protocol infrastructure and Nexera ID technology to tokenize these instruments as fully compliant AMCs. Investor’s capital will be locked into smart contracts, to be released only once the project’s minimum funding threshold has been achieved. Investors will then receive a traditional AMC that will be managed by AllianceBlock.
The main advantage of this initiative is that traditionally risk-averse institutional investors now have a way to offer capital to promising crypto projects in a way that’s fully compliant. AMCs provide a different form of ownership that’s more palatable than owning digital tokens.
AllianceBlock Chief Executive Rachid Ajaja said his company is offering institutional investors a compliant and less risky way to get involved in DeFi. “This partnership marks a significant milestone for both companies and the industry as a whole, demonstrating our commitment to innovation, compliance, and risk management,” he said.
In addition to AMCs, AllianceBlock and ABO Digital said they will enable large crypto funds, private equity firms and others to issue capital in the shape of tokenized financial instruments such as bonds, options and shares. By tokenizing such instruments, the companies say they’ll be able to appeal to newer classes of investors.
Asset tokenization is one of the most promising areas of DeFi, or decentralized finance, as it has the potential to transform how investments are made. As AllianceBlock explains, many real-world assets are traded in an extremely primitive way, with ownership certified on paper contracts. This results in higher costs and long transaction times, and makes it difficult to subdivide the ownership of many kinds of assets. Digital tokenization will enable fractional ownership of almost any kind of asset with lower costs, making them accessible to all types of investor, be it an institution or private individual.
ABO Digital CEO Amine Nedjai said today's announcement will tempt more institutional capital providers to look at the evolving DeFi space. “We look forward to working with AllianceBlock and paving the way for a new era in finance, one that is both creative and professional,” he said.
Going forward, AllianceBlock said it will work with ABO Digital to explore additional alternative financial investments for institutions using tokenization, as part of its mission to build a seamless gateway between the traditional and decentralized finance worlds.