Historic Violin NFT Used as Collateral for Loan by Galaxy Digital

A Stradivarius violin, once owned by Russian Empress Catherine the Great, has been tokenized and used as collateral for a multimillion-dollar loan by Michael Novogratz’s Galaxy Digital and Animoca Brands co-founder Yat Siu.

On June 4, Galaxy Digital lent an undisclosed amount of money to Yat Siu, who offered his 316-year-old Stradivarius violin as collateral. The violin was tokenized into a nonfungible token (NFT) by Galaxy, which will hold both the NFT and the physical violin until the loan is repaid.

Although the exact loan amount was not revealed, it was described as being “in the millions.” A custodian based in Hong Kong will keep the violin until the loan agreement between Siu and Galaxy is concluded.

A Violin with a Regal Past

This Stradivarius violin, dating back over 300 years, has a rich history, having been owned by Russian Empress Catherine the Great. Tarisio, a musical instrument auction house, has meticulously documented its provenance. The violin was initially acquired by the Russian ambassador to Venice for Empress Elisabeth Petrovna, who ruled from 1741 to 1762. Upon her death, it was passed to her successor, Catherine the Great. In 2023, Yat Siu purchased this historic instrument at an auction for over $9 million.

Tokenization in Lending

Thomas Cowan, Galaxy Digital’s vice president of tokenization, highlighted the transformative potential of tokenizing physical assets in the crypto lending space. Given the volatility of digital assets, collateral requirements are typically high. However, tokenizing physical assets like the Stradivarius violin allows for greater lending flexibility, even against volatile cryptocurrencies such as Bitcoin and Ether. Cowan suggested that this approach could eventually include real estate.

A Galaxy spokesperson indicated plans to tokenize more assets, stating: “The tokenization of the violin is just the beginning. A wide range of assets will eventually be tokenized, unlocking their value while preserving ownership and intellectual property.” Initially focusing on high-end assets like art and real estate, the process is expected to expand to everyday items, such as cars.

Decline in NFT Sales

Despite the use of NFTs in physical asset tokenization, the market for digital collectibles experienced a significant downturn. According to CryptoSlam, NFT sales volume dropped by 54% in May. After achieving over $1 billion in sales in April 2024, the volume plummeted to $624 million in May, with major NFT blockchains Bitcoin, Ethereum, and Solana all showing substantial declines.