Should Family Offices Consider NFTs as an Asset Class Like Art?
Posted on 10/27/2021
NFT stands for non-fungible token. NFTs are unique and non-interchangeable unit of data stored on a digital ledger. NFTs can be used to represent easily-reproducible items such as photos, videos, audio, and other types of digital files as unique items, and use blockchain technology to establish a verified and public proof of ownership. NFTs are essentially the collision of art and cryptocurrency. The most popular NFT applications are digitally native collectibles and artwork.
Sovereign wealth funds like GIC Private Limited are funding the NFT infrastructure by backing companies like Dapper Labs, Inc. Dapper Labs is a blockchain-focused technology company and has partnered with the NBA in launching NBA Top Shot. Even large software companies like Adobe are building software infrastructure for NFTs. Adobe is creating a system built into Adobe Photoshop that can assist in proving an NFT. Adobe calls it Content Credentials. Adboe seeks to help NFT sellers link their Adobe ID with their cryptocurrency wallet. Adobe plans to partner with NFT marketplaces like OpenSea, Rarible, KnownOrigin, and SuperRare and have them integrate Adobe’s Content Credentials into the attribution. This would be a boon for Adobe.
Family Offices
Family office and other wealthy individuals are known for investing in a wide range of assets including art and wine. Some even invest in horses, which at times are used as tax shelters. NFTs could be another avenue for family offices and in a way help get artists paid for their work. For investors, are NFTs the top of a frenzied market or just the beginning? A Citi Private Bank annual survey on family offices showed that 23% are invested in crypto assets and another 25% of family offices are considering crypto investments.
Some notable NFT transactions include Christie’s, which sold a collection of nine CryptoPunks for US$ 16.9 million in May 2021. Twitter and Square CEO Jack Dorsey sold the first ever tweet for US$ 2.5 million on Valuables by Cent, with the proceeds donated to GiveDirectly Africa.