Loan secured by Galaxy Digital through historic violin NFT

Michael Novogratz’s Galaxy Digital and Animoca Brands co-founder, Yat Siu, have taken an innovative approach to secure a multimillion-dollar loan by tokenizing a 316-year-old Stradivarius violin from 1708. On June 4, Galaxy provided Siu with an undisclosed amount of funds, using the violin as collateral. The antique instrument was transformed into a nonfungible token (NFT), and both the NFT and physical violin will be held by Galaxy until Siu repays the loan. Although the loan amount remains undisclosed, both parties have confirmed that it is in the millions. To ensure the violin’s safety, a Hong Kong-based custodian will safeguard it until Siu and Galaxy authorize its release.
The Stradivarius violin has an illustrious history, having once belonged to Empress Catherine the Great of Russia. Tarisio, a musical instrument auction house, has documented the violin’s provenance, tracing it back over 300 years. The Russian ambassador to Venice acquired the instrument for Empress Elisabeth Petrovna, who reigned over the Russian Empire from 1741 to 1762. Upon her death, the violin was passed down to her successor, Catherine II, also known as Catherine the Great. Siu acquired the violin in 2023 through an auction, paying over $9 million for it.
Thomas Cowan, Galaxy’s vice president of tokenization, believes that tokenizing physical assets could revolutionize the crypto lending industry. Typically, collateral tied to digital assets is high due to their volatility. However, by tokenizing physical assets like the Stradivarius violin, Galaxy can offer larger loans to clients, even if they possess volatile assets such as Bitcoin (BTC) or Ether (ETH). Cowan envisions that this concept could extend to other assets like real estate in the future.
While NFTs have been used to tokenize physical assets, the sales volume of digital collectibles has experienced a decline. In May, CryptoSlam reported a 54% drop in NFT sales volume compared to the previous month. In April 2024, NFTs generated over $1 billion in sales volume, whereas May saw only $624 million. Prominent NFT blockchains, including Bitcoin, Ethereum, and Solana, all experienced significant decreases in sales.