ETHZilla takes stake in Karus to tokenize AI-modeled auto-loan portfolios
In a significant development in the crypto finance landscape, ETHZilla has acquired a 20% stake in Karus, an AI-driven automotive finance startup. This strategic investment positions ETHZilla to offer onchain auto credit solutions by 2026, leveraging Karus's advanced underwriting technology.
The deal, valued at $10 million, consists of $3 million in cash and $7 million in ETHZilla stock. This acquisition will enable ETHZilla to integrate Karus's AI underwriting models into its blockchain infrastructure, facilitating the issuance of tokenized auto-loan portfolios.
ETHZilla makes strategic move into onchain credit market with Karus investment
ETHZilla, known for its treasury management within the Ethereum ecosystem, is taking a bold step into the onchain credit market through this partnership with Karus. The investment grants ETHZilla access to Karus's sophisticated AI underwriting engine and a well-established loan origination network.
With this strategic move, ETHZilla aims to tap into the lucrative automotive loan market, which represents a substantial segment of the U.S. asset-backed securities landscape. This sector had approximately $1.6 trillion in outstanding loans as of December 2024, according to regulatory data.
Details of the acquisition highlight cash and stock components of the deal
The $10 million investment in Karus is split between cash and stock, with ETHZilla contributing $3 million in cash and $7 million in its own shares. This blend of financial instruments illustrates ETHZilla's commitment to the partnership while also maintaining liquidity.
Following this acquisition, ETHZilla will secure a seat on Karus's board, which includes governance rights. This involvement could influence the strategic direction of Karus, enhancing collaboration between the two companies.
Significance of Karus's AI underwriting engine for auto-loan securitization
Karus's AI-driven decisioning engine is crucial for the partnership's success. Trained on over 20 million historical auto-loan outcomes and having evaluated more than $5 billion in loans, this technology equips ETHZilla with a robust data set. This pre-modeled data will enable the creation of AI-segmented pools for onchain settlement.
The initial tokenized portfolios are expected to launch in early 2026, promising to bring a new level of efficiency and transparency to the auto-loan market. Moreover, Karus's extensive network of car dealers, banks, and credit unions provides ETHZilla with a significant pipeline of potential loan portfolios for future securitization.
Growth of tokenized debt markets signals broader trends in finance
The acquisition comes at a time when tokenized debt markets are rapidly expanding. In 2025, institutions have increasingly utilized blockchain technology to issue and trade fixed-income products. This trend includes tokenized U.S. Treasurys and private credit, which are becoming key segments within this emerging market.
According to recent data, the market for tokenized Treasurys has surged to $9.21 billion, a substantial increase from $2.68 billion the previous year. Major asset managers are leading this charge, with significant holdings in tokenized government debt and corporate loans. This broader adoption of tokenization in the debt markets indicates a shift toward more efficient financial systems.
As ETHZilla embarks on this venture with Karus, it reflects a growing trend among crypto companies to explore traditional finance sectors, paving the way for innovative financial products that bridge the gap between blockchain technology and conventional lending practices.
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