Bringing Private Credit to Blockchain Infrastructure
Galaxy Digital has successfully closed its first tokenized collateralized loan obligation (CLO), marking a significant step in bringing private credit onto blockchain infrastructure. The deal, named Galaxy CLO 2025-1, is issued on the Avalanche blockchain and has already financed approximately $75 million in loans.
The transaction is notably anchored by an allocation of approximately $50 million from Grove, an institutional credit protocol operating within the Sky ecosystem, formerly known as MakerDAO. This collaboration highlights the growing institutional interest in leveraging blockchain for traditional financial instruments.
Chris Ferraro, president and chief investment officer at Galaxy, expressed enthusiasm about the initiative, stating, "By uniting our strengths in debt capital markets, blockchain technology, and asset management, we're opening a new avenue for institutional engagement in credit markets—one that benefits from greater efficiency, transparency, and expanded collateral flexibility through onchain execution."
The CLO is designed to bolster Galaxy's lending operations by providing an uncommitted credit facility to Arch Lending, a crypto lending platform supported by Galaxy Ventures. Arch Lending originates consumer loans that are overcollateralized with Bitcoin (BTC) and Ether (ETH). The funds generated from the CLO are utilized to purchase these loans as they are created, with the program having the potential to expand to $200 million over time.
Trading and Operational Framework
The crypto trading platform INX played a crucial role in issuing the CLO's bonds and facilitating their placement on the blockchain. These tokens are slated for listing on INX’s platform, making them accessible to approved investors. The most secure tranche of the CLO offers interest at a rate tied to the Secured Overnight Financing Rate (SOFR) plus 5.7%. This tranche matures in December 2026 and includes provisions for monthly payments, as detailed in the announcement.
Galaxy's internal teams were responsible for the intricate structuring and blockchain setup of the CLO, while Galaxy Asset Management is overseeing the product's ongoing management.
Anchorage Digital Bank serves as the trustee and custodian for the CLO. It leverages its blockchain infrastructure to provide real-time tracking of collateral and settlements. Furthermore, Galaxy has partnered with Accountable, a data platform that empowers investors with continuous monitoring capabilities for loan performance and the collateral backing the CLO.
Broader Market Insights from Galaxy Research
In a separate development, Galaxy Research, the research division of Galaxy Digital, has published insights into the future of digital payments. The firm predicts that stablecoins could surpass the transaction volume of the U.S. Automated Clearing House (ACH) system as early as 2026. The report highlights that stablecoins currently process a greater number of transactions than major credit card networks like Visa and already account for approximately half of the ACH transaction volume.
Galaxy noted a consistent growth trend in stablecoin supply, with an annual rate of 30% to 40%. This expansion in supply has been accompanied by a corresponding increase in transaction activity.