Tokenization and Regulatory Compliance for Art and Collectibles Markets: From Regulators’ Demands for Transparency to Investors’ Demands for Privacy

Abstract

Art and collectibles markets tend to involve lower liquidity and higher fees than public equity markets. Distributed ledger technology can tokenize artworks and collectibles, so that claims to these assets can be exchanged digitally without intermediaries. Tokenization offers investors access to a global market plus a digitized paper trail, as well as new options for the fractional ownership of artworks, art-collateralized loans, and yield-bearing art assets. The main challenge for tokenization researchers and platform developers is to simultaneously satisfy regulators’ demands for transparency and auditability as well as art investors’ demands for privacy. New technological solutions are required that enable market participants to disclose the absolute minimum amount of information that is demanded by regulators. We investigate how distributed ledger technology, cryptography, and digital identity management can help address this challenge.

The ‘Assetization’ of Art on an Institutional Level—Fractional Ownership Implemented in the Royal Museum of Fine Arts Antwerp

“…The idea behind it is, however, not new (Petterson 2022), and is in fact very similar to the ambitions of art funds (see for example Robertson and Chong 2008;Horowitz 2014;Velthuis and Coslor 2012). For private investors, fractional ownership used to take shape as the purchase of comparatively low-value shares of a securitized art fund (Barbereau et al 2022). More recent initiatives have implemented blockchain technologies-thereby expanding the concept of fractional ownership to a global pool of investors who are no longer obliged to register with a custodial broker or a company-owned stock exchange (ibid.).…”

“…More recent initiatives have implemented blockchain technologies-thereby expanding the concept of fractional ownership to a global pool of investors who are no longer obliged to register with a custodial broker or a company-owned stock exchange (ibid.). The emergence of blockchain technologies and their relation to the art market have already been discussed by various authors-including its application in for example provenance title registries and the payment of artist's resale rights (Charlesworth 2018;Whitaker and Kräussl 2018;Whitaker 2019;Barbereau et al 2022).…”

“…Peer-to-peer computing is supported by distributed ledger technology (DLT), making it possible to transfer economic value, rights, and claimsof both digital and physical assets-without custodial intermediaries such as banks or other financial institutions, but directly via peer-to-peer transactions. A successful transfer is achieved when a new record is appended to the blockchain-'to a distributed ledger's transaction history' (Barbereau et al 2022).…”

“…They enjoy the 'security, liquidity, and immutability' of cryptocurrencies, applied to real-world assets and the provenance of the tokenized artworks registered on the blockchain (Clavien 2020). Tokenized claims can pertain both to digital artworks or physical artworks, fungible or non-fungible; and to custodied assets or assets without a custodian (Barbereau et al 2022). In the case of Rubey, a physical artwork is being tokenized-therefore, digital collectibles (such as for example 'Cryptokitties' released by Dapper Labs) will not be discussed any further.…”

The ‘Assetization’ of Art on an Institutional Level—Fractional Ownership Implemented in the Royal Museum of Fine Arts Antwerp

“…The idea behind it is, however, not new (Petterson 2022), and is in fact very similar to the ambitions of art funds (see for example Robertson and Chong 2008;Horowitz 2014;Velthuis and Coslor 2012). For private investors, fractional ownership used to take shape as the purchase of comparatively low-value shares of a securitized art fund (Barbereau et al 2022). More recent initiatives have implemented blockchain technologies-thereby expanding the concept of fractional ownership to a global pool of investors who are no longer obliged to register with a custodial broker or a company-owned stock exchange (ibid.).…”

“…More recent initiatives have implemented blockchain technologies-thereby expanding the concept of fractional ownership to a global pool of investors who are no longer obliged to register with a custodial broker or a company-owned stock exchange (ibid.). The emergence of blockchain technologies and their relation to the art market have already been discussed by various authors-including its application in for example provenance title registries and the payment of artist's resale rights (Charlesworth 2018;Whitaker and Kräussl 2018;Whitaker 2019;Barbereau et al 2022).…”

“…Peer-to-peer computing is supported by distributed ledger technology (DLT), making it possible to transfer economic value, rights, and claimsof both digital and physical assets-without custodial intermediaries such as banks or other financial institutions, but directly via peer-to-peer transactions. A successful transfer is achieved when a new record is appended to the blockchain-'to a distributed ledger's transaction history' (Barbereau et al 2022).…”

“…They enjoy the 'security, liquidity, and immutability' of cryptocurrencies, applied to real-world assets and the provenance of the tokenized artworks registered on the blockchain (Clavien 2020). Tokenized claims can pertain both to digital artworks or physical artworks, fungible or non-fungible; and to custodied assets or assets without a custodian (Barbereau et al 2022). In the case of Rubey, a physical artwork is being tokenized-therefore, digital collectibles (such as for example 'Cryptokitties' released by Dapper Labs) will not be discussed any further.…”

Harvesting, Tokenizing, and Sharing the Influence of Planetary Abundance to Mitigate the Global Debt Catastrophe

“…Asset tokenization offers many key benefits, such as (Barbereau, et al, 2022): • Increased efficiency: since a blockchain is a trustless ledger, complex rules can be directly coded into tokens.…”

The ‘Assetization’ of Art on an Institutional Level—Fractional Ownership Implemented in the Royal Museum of Fine Arts Antwerp

“…The idea behind it is, however, not new (Petterson 2022), and is in fact very similar to the ambitions of art funds (see for example Robertson and Chong 2008;Horowitz 2014;Velthuis and Coslor 2012). For private investors, fractional ownership used to take shape as the purchase of comparatively low-value shares of a securitized art fund (Barbereau et al 2022). More recent initiatives have implemented blockchain technologies-thereby expanding the concept of fractional ownership to a global pool of investors who are no longer obliged to register with a custodial broker or a company-owned stock exchange (ibid.).…”

“…More recent initiatives have implemented blockchain technologies-thereby expanding the concept of fractional ownership to a global pool of investors who are no longer obliged to register with a custodial broker or a company-owned stock exchange (ibid.). The emergence of blockchain technologies and their relation to the art market have already been discussed by various authors-including its application in for example provenance title registries and the payment of artist's resale rights (Charlesworth 2018;Whitaker and Kräussl 2018;Whitaker 2019;Barbereau et al 2022).…”

“…Peer-to-peer computing is supported by distributed ledger technology (DLT), making it possible to transfer economic value, rights, and claimsof both digital and physical assets-without custodial intermediaries such as banks or other financial institutions, but directly via peer-to-peer transactions. A successful transfer is achieved when a new record is appended to the blockchain-'to a distributed ledger's transaction history' (Barbereau et al 2022).…”

“…They enjoy the 'security, liquidity, and immutability' of cryptocurrencies, applied to real-world assets and the provenance of the tokenized artworks registered on the blockchain (Clavien 2020). Tokenized claims can pertain both to digital artworks or physical artworks, fungible or non-fungible; and to custodied assets or assets without a custodian (Barbereau et al 2022). In the case of Rubey, a physical artwork is being tokenized-therefore, digital collectibles (such as for example 'Cryptokitties' released by Dapper Labs) will not be discussed any further.…”

Harvesting, Tokenizing, and Sharing the Influence of Planetary Abundance to Mitigate the Global Debt Catastrophe

“…Asset tokenization offers many key benefits, such as (Barbereau, et al, 2022): • Increased efficiency: since a blockchain is a trustless ledger, complex rules can be directly coded into tokens.…”

The ‘Assetization’ of Art on an Institutional Level—Fractional Ownership Implemented in the Royal Museum of Fine Arts Antwerp

“…The idea behind it is, however, not new (Petterson 2022), and is in fact very similar to the ambitions of art funds (see for example Robertson and Chong 2008;Horowitz 2014;Velthuis and Coslor 2012). For private investors, fractional ownership used to take shape as the purchase of comparatively low-value shares of a securitized art fund (Barbereau et al 2022). More recent initiatives have implemented blockchain technologies-thereby expanding the concept of fractional ownership to a global pool of investors who are no longer obliged to register with a custodial broker or a company-owned stock exchange (ibid.).…”

“…More recent initiatives have implemented blockchain technologies-thereby expanding the concept of fractional ownership to a global pool of investors who are no longer obliged to register with a custodial broker or a company-owned stock exchange (ibid.). The emergence of blockchain technologies and their relation to the art market have already been discussed by various authors-including its application in for example provenance title registries and the payment of artist's resale rights (Charlesworth 2018;Whitaker and Kräussl 2018;Whitaker 2019;Barbereau et al 2022).…”

“…Peer-to-peer computing is supported by distributed ledger technology (DLT), making it possible to transfer economic value, rights, and claimsof both digital and physical assets-without custodial intermediaries such as banks or other financial institutions, but directly via peer-to-peer transactions. A successful transfer is achieved when a new record is appended to the blockchain-'to a distributed ledger's transaction history' (Barbereau et al 2022).…”

“…They enjoy the 'security, liquidity, and immutability' of cryptocurrencies, applied to real-world assets and the provenance of the tokenized artworks registered on the blockchain (Clavien 2020). Tokenized claims can pertain both to digital artworks or physical artworks, fungible or non-fungible; and to custodied assets or assets without a custodian (Barbereau et al 2022). In the case of Rubey, a physical artwork is being tokenized-therefore, digital collectibles (such as for example 'Cryptokitties' released by Dapper Labs) will not be discussed any further.…”

Harvesting, Tokenizing, and Sharing the Influence of Planetary Abundance to Mitigate the Global Debt Catastrophe

“…Asset tokenization offers many key benefits, such as (Barbereau, et al, 2022): • Increased efficiency: since a blockchain is a trustless ledger, complex rules can be directly coded into tokens.…”