Avalanche Finance: Galaxy Digital Closes First $75 Million Tokenized CLO on Chain

Avalanche is now the settlement layer for the first tokenized collateralized loan obligation (CLO) issued by Galaxy Digital, a major breakthrough in blockchain finance. The first issue of a $75 million tokenized CLO, conducted on the Avalanche blockchain, launches fully on-chain private credit products that may disrupt institutional markets’ participation in structured finance in the digital asset space.

What the Galaxy CLO Means for Blockchain Finance

The CLO issued by Galaxy Digital has been named Galaxy CLO 2025-1. In essence, it marks the maiden foray of Galaxy Digital into the realm of tokenized structured credit. The CLO has been underpinned by a seasoned credit infrastructure protocol named Grove, which has provided a $50 million institutional allocation.

This is the first close and has already provided funding for loans totaling approximately $75 million through an uncommitted credit facility to a lending platform called Arch Lending, which is supported by Galaxy Ventures and offers crypto loans. The business lends consumer loans that are over collateralized by assets such as Bitcoin and Ethereum.

Galaxy’s President and CIO, Chris Ferraro, has described their CLO, or Credit Line Offering, as being an ‘intersection of debt markets, blockchain, and asset management.’ This platform has been developed to make it more efficient, transparent, and flexible than existing securitization methods.

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Tokenization and Institutional Access

One of the most innovative aspects of this transaction is that the debt tranches of CLO are going to be tokenized on Avalanche blockchain by INX, which is a regulated trading platform. The tokenized securities will be listed on INX’s Alternative Trading System (ATS), which will allow qualified buyers to trade and settle their transactions within a blockchain network.

The Avalanche network facilitates such issuance through its quick finality and high throughput, providing a known and efficient settlement layer that is necessary for the credit product. This is in line with the institutional demand for DeFi-type financial instruments that integrate traditional finance rigor with the transparency of the blockchain technology.

The financial conditions of the CLO are that it has a senior coupon linked to the Secured Overnight Financing Rate (SORR) with a spread of 570 basis points, and it has monthly payments and matures in December 2026, which are normal for institutional credit agreements but are now presented on-chain.

Why This Matters: Scaling Blockchain Credit Markets

The tokenized CLO transaction conducted by Galaxy indicates that there is a shift towards integrating blockchain technology for complicated financial instruments rather than focusing solely on payments and token trading.

The success of implementing a structured credit instrument on Avalanche with institutional anchor capital and regulated issuance allows for future structured financial products to be developed with blockchain technology.

The scalability of CLOs to $200 million with more loans being originated is another feature that further emphasizes its adaptability and potential for growth in these debt tokens. This potential is further emphasized in that it may create more liquidity in markets that were otherwise segmented in private credit and structured finance markets.

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