Will Blockchain Create a More Transparent Art Market or Merely Entice More Investors?
Will Blockchain Create a More Transparent Art Market or
Merely Entice More Investors?
This week, Christie’s announced that it would pilot
blockchain technology to record its fall auction season, but will the digital
ledger system solve the market’s transparency problems?
By Zachary Small November 13, 2018
Christie’s auctioneer Jussi Pylkkänen soliciting bids on
Picasso’s “Fillette à la corbeille fleurie” at the May 9 Rockefeller collection
evening sale (image courtesy Christie’s)
One of the world’s leading auction houses is turning to
digitally encrypted technology to register its future art transactions. In
October, Christie’s announced that it would pilot blockchain technology as part
of a unique collaboration with Artory, a leading independent digital registry
for the art market.
This month, each artwork sold from An American Place: The
Barney A. Ebsworth Collection auction will include a secure, encrypted
certification of the sale for the successful bidder, providing what Christie’s
press release calls “a permanent digital record of relevant information about
the artwork.” The auction includes work by star painters like Jackson Pollock,
Willem de Kooning, Georgia O’Keeffe, Jasper Johns, and Marsden Hartley. The
cumulative price-tag of the sale is estimated to exceed $300 million.
Artory said in a blog post that its blockchain registry
offers a “secure digital record of transactions, with a goal of providing
greater confidence in an artwork’s ongoing provenance and greater efficiency in
its eventual resale. Collectors with artworks registered with Artory maintain
anonymity, as their identity is never stored in the Registry.”
There are two points in the above statement that are
slightly misrepresentative of blockchain’s potential to affect the art market.
First, blockchain technology is marketed to auction houses as an assurance tool
for buyers worried about potential provenance issues. The problem here is that
such record-keeping is not retrospective and cannot solve misrepresentations in
existing records. This can lead to major problems for most high-value artworks
that sometimes have centuries-long histories of ownership. Second, the
maintenance of anonymity on behalf of buyers contradicts a promise of clear
provenance. It also perpetuates a belief that auction houses are arenas for
oblique financial transactions with little responsibility to the public.
That last point remains a significant source of
contention in the industry. Proponents of the art market often argue that auction
houses should be exempt from most regulations facing financial institutions
like banks and investment firms because the value of art is subjective, unlike
traded commodities such as precious metals and jewelry, which are subjected to
more stringent standards. Moreover, most auction houses are privately owned. In
fact, only Sotheby’s is a publicly traded company and therefore has a more
specific mandate for transparency. (Christie’s is privately owned by
François-Henri Pinault’s holding firm, Groupe Artémis.)
Apathy toward the potential problem-solving magic of
blockchain technology is also evident in the industry itself. When asked about
the application of such innovations to the art market, experts on a panel for
the Art Market and Money Laundering symposium held at the Fashion Institute of
Technology in October gave lukewarm responses. Sure, it’s prudent for auction
houses to implement any new technology that may possibly stymie illicit
activities such as fraud, but there is no guarantee that blockchain will serve
as a stopgap to financial malfeasance.
The most sanguine blockchain enthusiasts promise that the
online ledger system will effectively give everyone on the planet a digital
identity and access to international payment systems usually out of reach from
poorer populations. Only a few months ago at Christie’s July Art+Tech Summit,
the company’s photography specialist Anne Bracegirdle argued that artists could
adopt blockchain to monetize their work, enabling limited editions of images
that might be sold and resold with the technology, acting as both the source of
the image and its verification. Almost like a solution to the era of mass
reproducibility, blockchain is seen more as a way to create scarcity instead of
availability. After all, auction houses have an interest in preventing
forgeries from entering the market for a number of different reasons, one being
that a larger supply of valuable artworks can lower the dollar signs of demand.
More likely, blockchain will become a confidence booster
for investor-type collectors who want to park their wealth in physical assets
outside the turbulent market economy. When combined with the tax advantages of
storing high-priced art in free ports and the luxury storage facilities of
Foreign Trade Zones, like the recently opened Arcis building in Harlem,
collectors would have little worry about seeing their investments vanish and
show up again on the auction block unidentified.
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