In 2019, Hunton Andrews Kurth LLP’s structured finance and securitization team closed a number of substantial transactions, developed novel structures for our clients and advised on important tax, regulatory and other industry developments, including emerging uses of blockchain solutions.
Blockchain technology and smart contracts have shown their potential in a number of areas, such as fintech, retail/consumer products and insurance and energy, and we expect those areas to continue to expand. This year marked our firm’s first foray in the financing of blockchain-originated mortgage assets. While there is still continued reliance on traditional mechanics and infrastructure to ensure proper legal transfer of title, as the blockchain platforms mature and the industry participants increase, this segment of the market will continue to become more universally accepted.
In 2020 (as was the case in 2019), we expect to see a significant increase in the offer and sale of security tokens and other tokenized assets. Regulators at the state and federal levels continue to be active in the space, with each of the SEC, IRS and FinCEN releasing significant regulatory guidance on digital assets in 2019 and New York’s Department of Financial Services proposing guidance for crypto exchanges holding a virtual currency license.
Notably, Hunton represented Jefferies Funding LLC in its role as note purchaser and lender in connection with a $1 billion variable funding financing facility of home equity lines of credit (HELOCs) with Figure Lending LLC in a first-of-its-kind financing transaction involving collateral originated on blockchain. Figure Lending, a blockchain lending startup, has changed home equity lending by using cutting-edge technology in the origination process. The startup recently developed Provenance.io, a blockchain platform used to originate, finance and sell HELOCs to banks, asset managers and credit funds. This deal effectively paves the way for the first structured financing on blockchain, demonstrating the cost-savings, risk reduction and liquidity benefits that blockchain can deliver.