The Digital Ecosystem of Art - Tokenization and the Future of Art, 2021

For what concerns the intersection between technology and art, the most fascinating topics are: digital art, applications of artificial intelligence to art, online sales, which have experienced 500% growth as a result of the Covid-19 pandemic, artists’ and collectors’ use of social media, technologies such as augmented, virtual or "mixed" reality for artistic fruition and lastly the fingerprinting, blockchain and tokenization technologies.

I would like to focus especially on the latter. Nowadays we often talk about NFTs and digital art. However, the topic of tokenization is not only tied to these two applications, but it is also associated with the possibility of creating security tokens for art pieces. It is estimated that globally over $1,74 trillion are invested in art and collectibles. Thanks to technology and especially to tokenization, it might be possible to integrate this sum in wealth management practices. In the past 10 years, we have been able to identify the difficulties of including an art related offering in financial and wealth management practices. This is mainly due to issues related to art work valuation, liquidity, lack of transparency and of an adequate regulatory system. At present, even though multiple solutions are being developed to overcome these challenges, a widespread and systematic approach to identify art pieces with certainty is yet to be implemented. Over time, technology will enable for a more holistic approach to wealth management, comprehensive of art related services.

Should it be possible to tokenize the aforementioned $1,74 trillion as security assets, and therefore treat them as financial products, the Wealth Management sector could better manage collectibles, also from a collection management, valuation and protection standpoint. One of the possible future applications could be “art secured lending”, which consists in granting loans to purchase art pieces on a parametric base, and thus insured by the blockchain system. Protection, monetization and transferring value to the next generations are fundamental themes.

Lastly, future applications of the tokenization technology in the art world could support cultural institutions with liquidity issues. For instance, some cultural institutions in the USA who were experiencing economic hardship have sold art pieces of their collections to support themselves financially. Although it is a rather controversial and provocative topic, instead of selling art pieces from their collections, why do cultural institutions not create security tokens for an art piece instead? This would allow selling partial ownership of the piece to other private and institutional clients, but the tangible art piece would remain exhibited in the cultural institution’s premises. At present, such a solution would be impossible to implement in Italy and in Europe, but one day it could become a way of “monetizing” art pieces.

Adriano Picinati di Torcello is Global Coordinator for Deloitte Art & Finance and leads all activities related to the Deloitte Art & Finance division in Luxembourg. Since 2008, Deloitte’s Art & Finance operations have started growing internationally. Adriano Picinati di Torcello is co-author of the biannual publication Deloitte and Art Tactic “Art & Finance Report”, which describes the main trends and topics related to the art world.

Deloitte Tax & Consulting, société à responsabilité limitée (“Deloitte”) grants Generali Italia S.p.A. (“Generali”) a perpetual, revocable, non-exclusive, non-transferable, royalty free and worldwide license to use, print and publish, in the form approved by Deloitte, the white paper entitled “L’Ecosistema Digitale dell’Arte” written by Generali based on the participation of Deloitte’s employee, Adriano Picinati di Torcello, to Generali’s conference on May 12, 2021 regarding the “L’evoluzione tecnologica del mercato dell’arte” (the “White Paper”). Deloitte authorises Generali to use Deloitte’s name in the White Paper only to the extent required in the framework of its publication. The licence hereby granted to Generali being limited, revocable, non-exclusive, non-transferable, royalty free and worldwide. Any and all publications and/or materials relating to the White Paper and/or any reference to Deloitte to be made by Generali has to be submitted in draft version to Deloitte for approval prior to publication and/or distribution. Deloitte reserves the right to request Generali to modify content of such publications and materials.” “Further information about Deloitte processing of personal data, rights of data subjects (e.g. access to, modification or deletion of data, or withdrawal of consent) and how such rights can be exercised, can be found in Deloitte Data Privacy Statement at https://www2.deloitte.com/lu/en/legal/privacy.html.