Tokenizing a classical musical instrument and getting a loan of millions of dollars?

Author: Sonali Basak, Bloomberg

Compiled by Luffy, Foresight News

Billionaire Michael Novogratz’s Galaxy Digital Holdings LP is expanding its loan business to a new customer base. The latest transaction is a multimillion-dollar loan secured by a violin that once belonged to Russian Empress Catherine the Second.

According to Yat Siu, co-founder of Galaxy and Animoca Brands, Galaxy lent the money to Siu, who last year acquired the 1708 Stradivarius violin at an auction with an estimated value of over 9 million dollars.

Galaxy will hold the tokenized version of this instrument in the form of non-fungible tokens (NFTs), as well as the violin itself. Galaxy and Siu declined to comment on the specific terms or amount of the loan, only revealing that the loan amount is “in the millions of dollars.” The violin will be held by a custodian in Hong Kong and requires both parties to sign an agreement to take possession of the violin.

Galaxy Digital tokenizes a 316-year-old violin

Tokenization refers to the process of representing traditional assets such as stocks, bonds, artworks, etc. with tokens on the blockchain.

Galaxy Digital has provided a loan through its trading and investment banking division, Galaxy Global Markets. The violin loan represents the company’s initial efforts to attract different customer groups, who are benefiting from the rise in cryptocurrency prices and the subsequent increase in wealth.

According to Galaxy’s financial statements, as of March 31, the company’s average book loan balance in the first quarter was $ 664 million, a 5% increase from three months ago.

Due to the volatile nature of asset prices, loans tied to cryptocurrencies typically require a significant amount of collateral. Thomas Cowan, Vice President of Tokenization at Galaxy, suggests that this situation may improve as assets representing real-world assets are issued on the blockchain.

Is the next step real estate?

Cowan said in an interview that tokenizing physical assets such as artworks or instruments ‘allows us to offer customers more loans than volatile assets such as Bitcoin or Ethereum. Today it’s a violin, tomorrow it could be real estate.’

Siu said he may use the proceeds from the loan to invest in new cryptocurrency-related projects or artworks.

“I wonder how we can create something special that more people can use,” Siu said when talking about the process of tokenization. As for violin collateral loans, he added, “This is also a good way to gain additional liquidity, although it is not necessary.”

Galaxy tokenizes violins through its subsidiary GK8 in collaboration with Siu.

Siu said he eventually hopes to allow others to purchase tokenized violin ownership through ‘fractionalization,’ but he added that there are currently no plans to do so.