Mike Novogratz’s company Galaxy Digital has tokenized a 316-year old Stradivarius violin to back a loan. Owned by Animoca Brands Co-Founder Yat Siu, the violin originally belonged to Russian Empress Catherine the Great and is worth around $9 million.
Galaxy Digital has rolled out a multi-million dollar loan to Siu. The original violin and the tokenized NFT version will both be held as collateral against the loan handed out. The exact amount lent, however, has not been disclosed by either party. Siu intends to use the loan proceeds to invest in new crypto-related projects or art.
With respect to the loan against the violin, Siu said,
“It was also a good way — although it wasn’t required — to get additional liquidity.”
Tokenization of IRL assets is not a new narrative. Several prominent institutions have already started placing real-world assets on blockchain rails. Typically, any asset that has monetary strings attached can be brought on-chain. That could range from real estate, commodities, money market instruments, private equity, intellectual properties, art, and in this case an antique violin. The shift to blockchain has its own merits and bestows users with increased efficiency, enhanced liquidity, transparency, scalability, automation, reduced frictional costs, and faster settlements.
Galaxy’s vice president of tokenization, Thomas Cowan, explained that loans tied to crypto assets require hefty collateral, owing to the volatile nature of digital assets. Nevertheless, bringing physical assets onto blockchains could change that. He added,
"[Tokenizing physical assets] allows us to lend potentially more for our clients than against more volatile assets like Bitcoin or Ethereum. Today it’s a violin, but tomorrow it could be real estate.”
Tokenization also comes with another inherent advantage. Assets that could only be bought by the wealthy in the past can now be purchased by literally anyone - as fractions, making the playing field leveled for people with access to less capital. Going forward Siu is looking to allow others to buy fractions of the tokenized violin. However, there is no concrete plan or agreement in motion at the moment.
