Tokenization platform Huma Finance merges with Circle-backed liquidity platform Arf

Huma Finance, a tokenization platform for real-world assets, has merged with Arf, a liquidity and settlement platform focused on cross-border payments, to improve the adoption of tokenized assets.

"The merger combines two of the most prominent blockchain use cases — tokenizing real-world assets and cross-border payments — into a single full-stack platform," Huma Finance co-founder and co-CEO Erbil Karaman told The Block.

As part of the deal, Huma and Arf will become part of the newly formed 00 Holdings Inc., the holding entity, Karaman said. But both firms will continue operating separately under their existing names and brands, he added.

Karaman declined to share the terms of the deal but said the new entity is in the process of closing a "big" funding round following the merger.

The Huma-Arf merger comes as the tokenization vertical is growing. Several traditional finance giants, including BlackRock, JPMorgan, Citi and Franklin Templeton, have embraced tokenizing real-world assets. Tokenization or on-chain finance is believed to make real-world assets more accessible, streamline processes, reduce costs and enhance transparency in financial markets.

Huma and Arf merger

Huma launched its tokenization platform last year, focusing on cross-border payments, green financing, supply chain financing and microfinancing. The platform is currently live on Polygon and Celo. It is expected to launch on Stellar's new smart contract platform Soroban in the coming months, Karaman said.

Arf, on the other hand, was founded in 2019 and offers liquidity and settlement services to licensed financial institutions making cross-border payments. Arf says it is regulated in Switzerland, ensuring compliance with anti-money laundering and counter-terrorist financing regulations.

Huma and Arf have already been partners since early last year. "Arf incorporates blockchain technology via the Huma and Circle platforms to provide instant liquidity for financial institutions to make cross-border payments without the need for pre-funding and expand access to real-time global money transfers to more businesses and consumers," Ali Erhat Nalbant, co-founder, and CEO of Arf, told The Block.

Arf recently surpassed $1 billion in on-chain liquidity volume. The merged entity now expects to cross $3 billion in volume by year-end based on a pipeline of $500 million monthly liquidity demand from partners around the world, Nalbant said.

Huma and Arf aren't profitable yet. Both firms' revenues grew by 35x last year, and they expect the new entity to break even by the end of this year, Nalbant added.

Huma and Arf investors to become shareholders of new entity

Huma and Arf are both backed by notable investors. Huma raised $8.3 million early last year from venture firms, including ParaFi Capital, Circle Ventures and Robot Ventures. Arf raised $13 million from investors, including Circle Ventures, United Overseas Bank Venture Management and Stellar Development Foundation.

As part of the merger, venture capital investors of both firms will become shareholders of the holding entity 00 Holdings, Karaman said.

Huma and Arf began discussing merging last year and signed papers in November. Shareholders have approved the deal, and the legal process is expected to be completed later this month, Karaman said.

There are currently ten people working for U.S.-based Huma and 30 people for Switzerland-headquartered Arf, and these employees will remain under existing entities while collaborating more closely day to day, Karaman said.

Derek Colla of Cooley LLP, Huma's general counsel, and Cooley's mergers and acquisitions team and Switzerland-based Domenig & Partner advised the merger deal, Karaman added.