Tokenized CLO Breakthrough: Galaxy Digital Secures $75M Landmark Deal on Avalanche Blockchain

In a landmark move for institutional finance, Galaxy Digital has successfully closed its first tokenized collateralized loan obligation (CLO), financing approximately $75 million in loans on the Avalanche blockchain. This pioneering deal, announced on Thursday, represents a significant step toward bringing traditional private credit markets onto transparent, efficient blockchain infrastructure. The transaction, named Galaxy CLO 2025-1, leverages blockchain technology to enhance the speed, transparency, and collateral flexibility of institutional lending operations.

Galaxy Digital’s Tokenized CLO on Avalanche

Galaxy Digital, a leading digital asset and blockchain leader, has structured a novel financial instrument that merges debt capital markets with distributed ledger technology. The CLO is specifically designed to support the lending activities of Arch Lending, a crypto lending platform backed by Galaxy Ventures. Consequently, Arch Lending issues consumer loans that are overcollateralized with Bitcoin (BTC) and Ether (ETH). The capital from the tokenized CLO directly purchases these loans as they originate, with the program possessing a capacity to scale to $200 million over time.

Chris Ferraro, President and Chief Investment Officer at Galaxy, emphasized the strategic importance of this fusion. “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,” Ferraro stated. He further highlighted the benefits of “greater efficiency, transparency, and expanded collateral flexibility through onchain execution.”

The Mechanics and Key Partners of the Deal

The transaction’s architecture involves several crucial partners, each playing a distinct role in ensuring its security and functionality. Significantly, the deal is anchored by a substantial $50 million allocation from Grove, an institutional credit protocol operating within the Sky ecosystem, which was formerly known as MakerDAO.

• Issuance and Trading: Crypto trading platform INX issued the CLO’s bonds and tokenized them on the blockchain. These digital tokens are expected to be listed on INX’s platform, making them accessible to approved investors.
• Structure and Oversight: Galaxy’s internal teams managed the complex structuring and blockchain integration, while Galaxy Asset Management maintains oversight of the ongoing product.
• Security and Custody: Anchorage Digital Bank serves as the trustee and custodian. It utilizes its proprietary blockchain infrastructure to track collateral and settlements in real time, a critical feature for risk management.
• Transparency: Galaxy partnered with Accountable, a specialized data platform. This allows investors to continuously monitor the performance of the underlying loans and the collateral backing the CLO.

The safest tranche of the CLO offers investors interest payments tied to the Secured Overnight Financing Rate (SOFR) plus 5.7%. This portion matures in December 2026 and distributes payments monthly.

Expert Analysis: The Shift Toward On-Chain Finance

This transaction is not an isolated event but part of a broader trend of tokenizing real-world assets (RWA). Financial institutions globally are increasingly exploring blockchain rails to streamline operations. For instance, the London Stock Exchange Group (LSEG) recently initiated projects to bring commercial bank money onto blockchain. Similarly, Swiss bank Sygnum has predicted accelerated growth for tokenization and state Bitcoin reserves by 2026.

Galaxy Digital’s own research arm supports this macro view. In a recent report, Galaxy Research projected that stablecoins could process more transaction volume than the U.S. Automated Clearing House (ACH) system as early as 2026. The firm noted that stablecoins already handle more transactions than major card networks like Visa and account for roughly half of ACH volume. This growth, driven by a 30–40% annual increase in stablecoin supply, creates a fertile environment for innovative on-chain credit products.

The Broader Impact on Private Credit and Blockchain

The successful closure of this CLO demonstrates several key advantages of blockchain-based finance. Primarily, it introduces unprecedented transparency into the traditionally opaque private credit market. Investors can now verify collateral and loan performance in real time through platforms like Accountable. Furthermore, the use of smart contracts on Avalanche automates many administrative and settlement processes, reducing counterparty risk and operational costs.

The choice of the Avalanche blockchain is also strategically significant. Known for its high throughput, low cost, and customizability, Avalanche provides an enterprise-grade platform suitable for complex financial instruments. This deal could serve as a blueprint for other asset managers and institutions seeking to tokenize various debt products, from corporate bonds to trade finance agreements.

Conclusion

Galaxy Digital’s $75 million tokenized CLO on Avalanche marks a definitive milestone in the convergence of traditional finance and blockchain technology. By successfully executing this collateralized loan obligation onchain, Galaxy has provided a working model for how institutional credit markets can gain efficiency, transparency, and flexibility. This deal not only supports Galaxy’s lending operations but also paves the way for broader adoption of real-world asset tokenization by major financial players. As blockchain infrastructure continues to mature, such innovative applications are poised to redefine the foundational mechanics of global capital markets.

FAQs

Q1: What is a tokenized CLO?
A tokenized Collateralized Loan Obligation (CLO) is a structured finance product that pools together income-generating loans and issues tradable bonds. Tokenization represents these bonds as digital tokens on a blockchain, enabling faster settlement, enhanced transparency, and easier fractional ownership.

Q2: Why did Galaxy Digital choose the Avalanche blockchain?
Galaxy Digital selected Avalanche for its high transaction throughput, low fees, and robust, customizable blockchain architecture. These features are essential for handling complex financial instruments like CLOs that require security, speed, and scalability for institutional use.

Q3: How does this deal benefit investors?
Investors gain access to a new, digitally-native credit product with greater transparency. They can monitor loan performance and collateral in real time. The structure also offers potential efficiency gains from automated blockchain processes and access to a growing market of crypto-backed loans.

Q4: What role does Grove play in this transaction?
Grove, an institutional credit protocol within the Sky ecosystem, is the anchor investor for the CLO. It has committed approximately $50 million to the deal, providing crucial initial capital and validation from a major player in the decentralized finance (DeFi) credit space.

Q5: What is the significance of tokenizing real-world assets (RWA)?
Tokenizing RWAs like loans, bonds, or real estate brings them onto a blockchain. This process can unlock liquidity, reduce administrative costs, enable 24/7 markets, and create a verifiable audit trail. It is widely seen as a major growth vector for both blockchain and traditional finance.