Cover Will Wang, head of client solutions & strategic partnerships Asia at VP Bank with Mr Thanasan Vichitkarn
Will Wang, head of client solutions & strategic partnerships Asia at VP Bank with Mr Thanasan Vichitkarn
1 / 1
Tatler+
Liechtenstein-based VP Bank is pioneering art tokenisation, which promises to revolutionise the management of rare and rarefied, non-fungible physical assets such as artwork and personal treasures—including a Patek Philippe Nautilus
The advent of blockchain technology and digital assets has created much interest, but attention has largely centred on just two products: cryptocurrencies and non-fungible tokens (NFTs). There is untapped potential here. What is needed are platforms and services that can leverage on the sector’s principles and technologies to create value and/or solve existing problems.
Enter VP Bank, which has accomplished both with its new art tokenisation service. This closely follows the passing of the Blockchain Act in Liechtenstein, where the bank is headquartered.
Will Wang, Head of Client Solutions & Strategic Partnerships Asia at VP Bank says: “Tokenisation, digital assets and crypto arrived many years ago. But these didn’t see as many “real” transactions”. A key reason for that was the initial lack of proper regulation. In January 2020, the Parliament of Principality of Liechtenstein passed a blockchain act, enabling a very stable, accountable legal framework that helps to achieve two certainties. One, for investors, where this law represents Investor Protection very strongly, and two, for the operators who also need to be in a stable and certain legal, regulatory environment. This law allowed tokenisation to not only be possible, but flourish”.
This isn’t just an innovative service that can fundamentally change how art and other rare objects are owned, traded, and accounted for. Instead, it also speaks of VP Bank’s philosophy to remain at the cutting edge of financial services. As this segment of the economy continues to mature, the bank remains well-poised to meet its clients’ evolving needs—while reciprocally spurring the sector’s growth, of course.
“There was a disconnect in the past, but this will somehow bring that previously illiquid collection industry into our mainstream financial one”, Wang adds.
Above Thai client Thanasan Vichitkarn with Will Wang, head of client solutions & strategic partnerships Asia at VP Bank
Thai client Thanasan Vichitkarn with Will Wang, head of client solutions & strategic partnerships Asia at VP Bank
1 / 1
The DIGITAL COUNTERPART
Officially, Liechtenstein’s Blockchain Act is known as the Tokens and Trusted Technology (TT) Service Providers Act, and it functions as the legal framework for the nascent token economy. Among other things, this framework governs the usage of blockchain technology in establishing ownership rights to tangible physical assets, while also providing the necessary legal protections for clients who utilise such services.
After the law was passed, VP Bank applied and received two licences to create and custodise tokens—and it started to pick up fast. Wang explains: “In 2021, we saw our first successful case of tokenisation of an art piece. This marked the first successful tokenisation case in Europe, and a huge milestone for VP Bank. The request came from a European collector. He was passionate about the concept and approached VP Bank. We considered it, did the necessary steps—like proof of ownership, safekeeping and proper valuation—and put in all the technical work for the system. The tokens of an artwork he owned was then put into his bank account, and that marked our first successful art tokenisation. We have since added watches, sculptures and gemstones to our tokenisation candidate shelf.”
As a registered token creator and TT token custodian, VP Bank is vested with the power to both create and hold tokens that represent proof of ownership of physical assets. Take, for example, an Asia-based client who has a painting that is currently stored in Singapore. This client can engage VP Bank Liechtenstein to create and safekeep a token that represents his ownership of the artwork, and essentially have a digital version of the traditional documents that serve as proof of ownership. Should the said client sell the artwork, ownership can be transferred quickly and easily to the painting’s buyer by updating the token—and blockchain ledger—to reflect the transfer. VP Bank can then continue to be the token’s custodian. Importantly, this can all be done without physically moving the artwork.
Don't miss: How VP Bank Is Reimagining the Bank of Today Through Good Design
Above VP Bank’s Will Wang with Thai client Thanasan Vichitkarn, who has tokenised his timepieces with the goal of safekeeping them as heirlooms for his family
VP Bank’s Will Wang with Thai client Thanasan Vichitkarn, who has tokenised his timepieces with the goal of safekeeping them as heirlooms for his family
1 / 1
MYRIAD ADVANTAGES
At first glance, art tokenisation may appear to add a new layer of digital processes to what should be a fairly straightforward act of owning a physical object. A deeper look into its fundamentals, however, will reveal various advantages. The obvious ones stem from the principles of blockchain technology that the service is built on.
For a start, a properly implemented blockchain offers unparalleled security, as the distributed nature of its ledger inherently better prevents any forms of forgery or record tampering. Since the ledger is also well-documented, transparency is another key advantage of art tokenisation, albeit with privacy protection for the owner(s)—VP Bank Liechtenstein can be publicly identified as a token’s custodian, but the token’s owner can remain anonymous for privacy reasons. With forgery and record tampering now moot, the provenance of any object can be conclusively—and effortlessly—established once it has undergone art tokenisation. This solves a key issue in the art world, where works must often be authenticated before transactions.
The digital nature of art tokenisation makes accounting a cinch too. Since tokens are displayed at all times in both asset statements and on the e-banking platform, a client can have a comprehensive overview of their tokens in real time. By extension, portfolio performance, tax liabilities and other such metrics can be easily calculated.
What’s more, the number of tokens that are created for a single item can vary. One hundred tokens could be created for a single sculpture, for instance, with each token representing one per cent of ownership. It’s also easy to see how such a system can greatly facilitate inheritance planning among several heirs, or to divide the royalties for a piece of work that was created by multiple people.
Despite its very name, it is important to note that art tokenisation does not just apply to pieces of artwork such as paintings. Instead, various physical objects can benefit from this service. They range from high jewellery to vintage cars, and would possibly include any rare and valuable item that benefits from having a reliable, traceable, transparent system that establishes and maintains proof of ownership.
“There was a disconnect in the past, but this will somehow bring that previously illiquid collection industry into our mainstream financial one”
“Personal collections of art and objets d’art have always been characterised as high value—with not much liquidity. If you wanted to sell, you’d either have to go through friends, a broker, or auction houses,” he muses, “in the new age of blockchain and smart contracts, however, you can now have ownership in a fractional manner, dividing ownership into multiple pieces. This fractional ownership is reflected as tokens—digital assets that can be translated into a bank account and traded between different parties. Tokenisation is based on blockchain technology, which means it’s a secured, decentralised way of proving your ownership rights”.
What’s also exciting about this platform is how it has the potential to fundamentally change how investments are made in these objects. Structured products with various art tokens as the underlying assets may be developed in the future, for example, to allow institutional clients to invest in a single diversified portfolio of various rare watches. In the same vein of things, mutual funds based on art tokens might just be possible, essentially allowing more investors to invest in what has been previously an impossible sector.
Wang affirms, “tokenisation is going to revolutionise the way we invest. The reason is very simple: when you create fractional ownership, you break down a very high entry hurdle where millions, if not tens of millions are needed to invest. You can have small tickets ready for any investor to participate. This is what we call in our terms, “democratisation”. Secondly, the liquidity that once was an issue is now available to be traded much more easily, and our VP Bank tokens are instantly reflected in the clients’ bank account statements.”
In case you missed it: How VP Bank Strengthened Its Position Within Asia’s Private Banking Space Over The Years
Above VP Bank’s head of client solutions & strategic partnerships Asia, Will Wang, at the VP Bank Singapore office
VP Bank’s head of client solutions & strategic partnerships Asia, Will Wang, at the VP Bank Singapore office
1 / 1
THE FOREFRONT OF BANKING
VP Bank’s art tokenisation service offers an unprecedented way to authenticate, account, and trade physical assets that are unique and non-fungible. The “digitisation” of these assets also opens the door to many opportunities, from using them as collaterals in loans to creating investment portfolios with their tokens. On the topic of asset appreciation on the blockchain, Wang says “the one thing we need to keep in mind is the highest segment of collectible items are characterised by rarity, which appreciates over time. If investors have a long investment time horizon, over time and generations, there’s a good likelihood that the prices would continue to go higher, even beyond economic cycles”.
But what’s perhaps the most important takeaway here is how the bank remains committed to being at the forefront of banking technologies to best serve its clients’ varied needs.
NOW READ
Wealth Experts Share The Secret to Seamless Family Succession at a Dinner Hosted by VP Bank
The Asia’s Most Influential 2022 List Is Now Live
Upfront With Pamela Hsu Phua On Being a Female CEO of a Leading Bank
Topics
