Opinion

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?

Christie's auctioneer Jussi Pylkkänen soliciting bids on Picasso's "Fillette à la corbeille fleurie" at the May 9 Rockefeller collection evening sale (all images courtesy Christie's)
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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