Investing in high-priced artwork is being transformed by new platforms, though this shift comes with its own set of challenges, including liquidity issues, transaction complexity, and the need for authenticity verification. Real World Assets (RWA) on the blockchain may be the answer with solutions that improve liquidity, ensure the authenticity of an art piece, while simplifying the transactions. Here’s how the most challenging investment issues in the world of high-value art can be resolved by RWA: 

Liquidity Issues Can be Solved by Improving Market Access and Speeding Up Transactions

Valuable artwork is often difficult to buy or sell quickly, making it an investment of low liquidity. This has historically limited its appeal to investors when they compare high-value art to more liquid investments like stocks and bonds. 

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Venly provides solutions using the blockchain, which offer fractional ownership and trades. These would dramatically improve the liquidity of extremely valuable art pieces. Art tokenization makes the transactions much easier and faster compared to conventional markets. Fractions of a single piece of art can be bought and sold, so it’s much easier to make the investment and to liquidate it without having to find a buyer who can afford the entire piece. 

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The art market has traditionally been opaque and completely inaccessible to someone new trying to invest. Art investment platforms would be wise to make things more democratic by increasing access while still keeping the exclusivity associated with high-value artwork. 

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This is what fractional ownership would do for people wanting to invest in high-value art. They could invest in a valuable piece of art, entering the art market without investing a large amount of money. Tokenized real-world assets offers the art market greater accessibility, so that it can attract investors both large and small.

Transactions are Simplified by Lowering Costs and Automating Regulatory Compliance

There can be significant costs involved when someone buys, sells, or transfers ownership of a valuable piece of art. These include the fee or percentage paid to an auction house, the cost to insure the artwork, crating, transporting, and storage. 

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All of these transaction processes can be streamlined when no intermediaries are needed. Smart contracts not only automate transactions, but they secure them as well. This significantly reduces costs, making investing in high-value art less expensive and more efficient.

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Making sure that all international trade regulations and laws are complied with can be daunting, especially those involving restrictions on import/export, and anti-money laundering (AML). All of this makes these transactions even more complicated than usual. 

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Venly has built-in tools that simplify the compliance process, ensuring adherence to applicable international laws and regulations. These tools include AML and KYC (Know Your Customer) solutions, which ensure the legality of all transactions. With compliance automated, high-value art investment platforms are relieved of the burden while increasing transaction security. 

Blockchain Technology Can Verify the Authenticity of Genuine Art 

The art world is constantly fighting the plague of fraudsters selling forgeries. Being able to ensure the authenticity of each piece of art by keeping accurate records of the provenance is crucial but poses challenges. 

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With blockchain technology you can keep a permanent record of an art piece’s provenance, which cannot be altered and remains totally transparent. Every transaction and change of ownership is made a record of on the blockchain. This permanent record ensures authenticity and lowers the risk of the artwork being a forgery, which promotes trust among investors. 

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Trying to find a reputable expert to verify the authenticity of a piece of art can be difficult and expensive, not to mention how subjective this could be. There are no universally accepted ways of verifying the authenticity of an item, making this even more problematic. 

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To address this problem, digital certificates of authenticity and ownership can be issued and stored on the blockchain. This offers a verifiable and secure way of confirming an artwork’s provenance, reducing the need for paying a reputable expert to verify its authenticity. This also provides a standardized method of authentication.  

Advanced Data Management is Required to Trace Provenance

The provenance of many pieces of art is either non-existent, incomplete, or in dispute, which erodes investor confidence, not to mention the artwork’s value. Researching, verifying, and managing voluminous provenance records is time-consuming, requiring a variety of resources. An advanced data management system can ensure the records are accurate and transparent. 

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By making a record on the blockchain of every transaction the provenance of each piece of art will not only be complete, but also immutable. This level of transparency can go a long way toward building investor confidence while preserving the artwork’s value. 

Fractional Ownership of High-Value Artwork Has its Challenges: Valuation, Trust, and Market Acceptance

One of the main challenges of fractional investments in artwork is accurately determining its true value, which causes a lot of contention, especially when it involves a distinctive, high-value piece.

Tokenization offers the perfect solution because it can help you develop valuation models that are not only transparent but standardized as well. Valuation models ensure assessments at a fair market value, which simplifies the valuation process while increasing investor confidence. 

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Persuading traditional art investors and collectors to trust and accept the idea of owning or investing in a fractional piece of art presents some challenges. People are naturally skeptical about how liquid this investment would be while questioning the governance of these types of investments. 

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Those concerns can by addressed by explaining how the use of art tokenization can clearly provide the advantages of fractional ownership. There are robust frameworks for governance as well as secure transactions on the blockchain, which ensure full transparency and trust. In addition, valuation models that are fully transparent help keep each assessment at a fair market value, increasing investor confidence.

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Blockchain technology can be used to provide complete records of ownership, real-time market data, and simplified trading capabilities. RWA can improve liquidity, and it demonstrates the trustworthiness of fractional ownership models. 

Navigating Complex Securities Regulations and Other Legalities

Fractionalized investments in artwork must clearly comply with securities regulations, which means that online platforms facilitating these transactions must be prepared to navigate all applicable regulations and legalities, so that all laws are complied with. 

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Art investment platforms using Venly’s compliance tools get the help they need navigating all applicable securities regulations. Therefore, their fractionalized investments comply with all relevant legalities, which makes these types of investments more appealing as well as secure.

Any investment platform’s top priority must be protecting the rights and interests of investors, especially when it comes to distributing revenues, voting rights, and resolving disputes. All this adds to the intricacies of fractionalized investment models. 

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Smart contracts can be used to ensure that investors are protected when they are clear about governance frameworks, and revenues are automatically and securely distributed. When an investor can see that their rights and interests will be protected, they’ll be more likely to make a fractionalized investment. 

Recent Reports on How Blockchain Technology is Transforming the Global Art Market

Deloitte reported that in 2019 the value of the global art market had reached $64.1 billion, however liquidity continued to be a major problem. According to The Art Market, as much as half of art transactions are beset with some type of misrepresentation, counterfeiting, or forgery.

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This just emphasizes the need for powerful verification processes. MarketsandMarkets reports that the blockchain market is expected to grow to a massive $39.7 billion globally by 2025. This means that blockchain technology is increasingly being used in a variety of industries across the world, which includes art. 

Conclusion

Excellent solutions for the issues facing platforms trading in high-value artwork can be found through Real World Assets on the blockchain. The use of blockchain technology can help these platforms ensure the authenticity of artwork, simplify transactions, and improve liquidity while making data management much easier.

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The investment market in art will continue to grow, and incorporating RWA solutions, like fractional ownership, NFT art, and art tokenization will be essential to staying ahead of the game by providing unparalleled assurances. 

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Click here for more information on how RWA can transform your art investment platform.

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