Future of Finance


What the international art market can learn from the securities services industry

Like insurance and trade finance, international art is a large and valuable market bedevilled by extended chains of intermediaries, excessive levels of fraud and hefty transaction costs.

And, like those other markets, art is ripe for transformation by the application of digital technology and techniques to the identification of assets and counterparties and the delivery of objects against payment. Future of Finance co-founder Dominic Hobson spoke to Angus Scott, CEO of ArtClear, a company whose founders are applying their experience of safekeeping and settlement in the securities markets to an industry where trust and automation are in short supply.

Questions being asked

1. How large (and active) a market is ArtClear addressing in terms of numbers and types of participants revenues, profits, geography and structure?

2. How has the art market performed relative to other asset classes?

3. How complex is the art market, especially in terms of intermediation (galleries, auction houses, shippers, warehouses) between artists and collectors? 

4. Who will your customers be: artists, collectors or intermediaries (e.g. insurers) or all three?

5. Your intention is to forensically scan works of art and attach unique digital fingerprints to the physical object. What is the value of doing this and which segments of the art market benefit from it and how?

6. How are transactions completed in the art market today and what are the shortcomings of the process?

7. How will ArtClear transform the transactional process? 

8. Trust is in short supply in the art world. How will ArtClear add trust to the art market in terms of:

–          History and provenance of works of art

–          Physical possession

–          Legal title and title transfer

–          Liens and charges (use of art as collateral)

–          Counterparty risk/identity of buyers and sellers (KYC, AMLK, CFT and sanctions screening checks)

–          Payment versus delivery

–          Reputation for money laundering

9.  Does Digital Identity have any part to play in your business?

10. Transaction costs are notoriously high in the fine art markets (25%). How will ArtClear reduce these?

11. Hefty transactions costs represent a high standard of living for some people. Will you not encounter serious resistance from certain incumbents?

12. Tokenization of fine art is often advanced as use case for blockchain technology. Is it happening? 

13. Do you expect to support issuers and investors in fine art tokens and, if so, how?

14. What about token exchanges – are they potential clients?

15. Non-fungible Tokens (NFTs) have attracted a lot of attention recently. Are they in scope of your business?

16. How do you expect to get paid in terms of (a) scanner rental income  (b) scanning transaction charges and (c) maintenance (of data) fees?

17. What parallels do you see between what ArtClear will do and what custodian banks and central securities depositories do in the traditional securities markets?

18. Have you chosen your technology at a high level (e.g. blockchain)  or in terms of specifics (e.g. Corda)? 

19. Who are you competing with?

20.   What is the biggest barrier between you and success (e. g. building the network)?

21.   Do you believe ArtClear can help the art market to grow?