By Sonali Basak, Bloomberg
Compiled by: Luffy, Foresight News
Galaxy Digital Holdings LP, founded by billionaire Michael Novogratz, is expanding its lending business to new client groups. The latest deal is a multimillion-dollar loan secured by a violin that once belonged to Russian empress Catherine II.
Galaxy loaned the funds to Yat Siu, who bought the 1708 Stradivari violin at an auction last year for an estimated price of more than $9 million, according to Yat Siu, co-founder of Galaxy and Animoca Brands.
Galaxy will hold a tokenized version of the instrument in the form of a non-fungible token, as well as the violin itself. Galaxy and Siu declined to comment on the specific terms or amount of the loan, only saying it was "in the millions of dollars." The violin will be kept by a custodian in Hong Kong, and the removal of the violin requires an agreement signed by both parties.
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Tokenization refers to the process of representing traditional assets such as stocks, bonds, and artworks with tokens on the blockchain.
Galaxy Digital already offers loans through its trading and investment banking unit, Galaxy Global Markets. The violin loans represent an initial effort by the company to attract a different client base that is benefiting from rising cryptocurrency prices and the resulting wealth.
Galaxy’s average loan book size in the first quarter was $664 million as of March 31, up 5% from three months earlier, according to its financial statements.
Loans tied to crypto assets often require large amounts of collateral because of the volatility of asset prices. Thomas Cowan, vice president of tokenization at Galaxy, said that this situation may improve as assets representing physical objects begin to be issued on blockchains.
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Tokenizing physical assets like art or musical instruments “allows us to lend more to our clients than we could with more volatile assets like Bitcoin or Ethereum,” Cowan said in an interview. “Today it’s a violin, tomorrow it could be real estate.”
Siu said he might use the loan proceeds to invest in new cryptocurrency-related projects or art.
“I was thinking about how we could create something special like this and make it accessible to more people,” Siu said of the tokenization process. As for violin mortgages, he added: “It’s also a good way to get additional liquidity, although it’s not necessary.”
Galaxy, through its subsidiary GK8, has partnered with Siu to tokenize the violin.
Siu said he would eventually like to allow others to purchase ownership of the tokenized violin through a “fractionation” process, but added that there are no plans to do so yet.