Cadeia

The asset securitization market is one of the biggest financial sub-markets globally, accounting for a staggering € 3.6 trillion in outstanding amount in the US alone in the year of 2020. While the European market (EU + UK) is significantly smaller in size – partially also due to higher regulatory hurdles and cross-border complexities – it still amounts to € 276 billion in 2020.

However, asset securitization is not only riddled with different regulatory and legal challenges across jurisdictions, but also represents a very complex type of transaction, where many different parties – sometimes up to 20 or even more – spend much time with setting up deal structures, sharing relevant documents, and conducting highly-complicated and sometimes even opaque processes. What the sector requires is the modernization of these complex procedures with the efficient use of contemporary technologies – a challenge that also represents the mission of the b2b fintech Cadeia. The company is transforming the global asset securitization market with its innovative blockchain-powered platform that automates and simplifies the complete lifecycle of asset securitization. “We bring a substantial paradigm shift in the way structured credit transactions and securitization can be agreed upon, executed, documented, reviewed, and audited,” begins Rolf Steffens, co-Founder & Managing Director of Cadeia.

Cadeia is founded by a group of experts from capital markets, investment banking, blockchain, and software engineering, who bring to the table a combined experience of over 120 years. These specialists pool their expertise into creating the company’s blockchain-agnostic multi-purpose capital markets platform, which enables collaborative and seamless structuring, issuance, servicing, and settlement of complex financial products. The platform provides maximum flexibility by offering different product types (e.g., bonds, asset-backed securities, and syndicated loans) and at the same time also different blockchains for transaction execution. For this purpose, it is essentially designed with two-tiered setup – a cloud-based Digital Services Platform (DSP) for user interaction and collaboration, and a proprietary Smart Contract Engine (SCE) as a gateway to issue, service and transfer financial products on varying blockchains.

The whole solution is adorned with intuitive usability, an easy-to-use interface, and convenient dashboards for its users, enabling them to have a holistic and real-time overview of their securitization and other structured transaction processes. The platform also has agile multi-tenant and multi-user environments, protected by intelligent cloud security protocols. Owing to its open architecture, Cadeia's platform can easily be integrated with third-party services, offering seamless service coverage to the users, and enabling them to leverage API plug-in effects.

After the users upload the asset portfolio data via the API into the DSP, the platform enables the user to easily execute data scrubbing and validation processes and to structure the transaction parameters, such as T&Cs, covenants, triggers, and the like. Cadeia's platform allows issuers, investors, and stakeholders to collaborate throughout the process effortlessly and to agree on the transaction parameters by executing a digital handshake.

This is followed by the creation of transaction-specific smart contracts through the SCE for product issuance and distribution. Businesses can automate rule-based distributions of cash flows, improving transparency, reliability, efficiency, and execution speed of the overall processes. In addition to this, the platform also offers reporting, compliance, and analytical tools to investors and issuers, who can exchange information in real-time and automatically generate audit trails. As a user-friendly platform, the solution doesn’t require users to have in-depth knowledge of blockchain technology or coding skills. In general, Cadeia's platform supports payments in fiat currencies as well as stablecoins, and is capable of automatically executing transactions covering traditional as well as tokenized assets and instruments.

At the end of 2021, Cadeia executed the first fully blockchain-based CLO transaction, named “GreyPeak 2021-01”, where it securitized a traditional corporate loan portfolio originated by a European private bank. The transaction comprised three tokenized securities tranches – a senior, mezzanine, and junior tranche – which were issued and transferred automatically into investor wallets in return for the subscription price through the smart contracts (delivery-vs-payment). Further related processes – securities transfer as well as cash flow distribution, including interest and amortization payments – were also managed through smart contracts. Since the transaction was settled in fiat currency, the set of smart contracts included a PSD2 trigger solution, which was accessing traditional banking interfaces to direct SWIFT payments.

Cadeia, currently post-seed, is aiming at conducting a “Pre-Series A” fundraiser in the third quarter of 2022 to finance its European rollout and technical platform development. Next to adding further blockchains to the SCE and a reporting engine, the company is also developing value-added functions. These include valuation tools, which will be built around transaction cash-flow and portfolio scenario modelling, relative value transaction comparisons, and machine-learning credit scoring models. Relative value functions will compare the performance of different transactions and allow investors to make more educated decisions, while machine learning models will empower market participants to rescore asset risks across a certain period. In terms of expansion, Cadeia also aims to step beyond European borders and to establish a foothold in America and Asia in the future. As Steffens concludes, “We are open for business to anybody who has a requirement for a structured credit transaction, asset securitization or bond financing.”