Want to own a Ferrari?

This article first appeared in The Edge Financial Daily, on February 3, 2020.

Ferrari F12tdf.

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Always dreamed of owning a Ferrari but cannot afford it? Well, this may sound vaguely familiar: The blockchain has a solution for you.

CurioInvest, an investment platform, and MERJ Exchange Ltd, a Seychelles-based digital asset exchange, are partnering to offer tokens backed by collectible cars. The companies say tokenising the luxury assets as an investment could make them widely accessible to a bigger pool of people.

“You can have a guy in Uganda who’s able to invest in a rare car that’s kept in a vault in Stuttgart, tokenised by a company in Liechtenstein and it all fits within this recognised regulatory environment,” Jim Needham, head of digital strategy at MERJ, said by phone. “It’s a perfect illustration of what this, as a tool, what blockchain technology and distributed ledger technology can do to democratise the capital markets.”

CT1 (CarToken1), as the token is known, is part of resurgence of offerings emerging amid a recent bounce in cryptocurrency prices. In fact, the method — which lets companies bypass the venture-capital process and allows investors to purchase fractions of an asset — originally gained traction during the crypto craze in 2017 and 2018. Back then, hundreds of companies took advantage of the mania to raise billions in funding.

The bubble burst after regulators started to crack down, citing fraud and questionable practices from a number of initial coin offerings that cost their investors millions in lost funds. New offerings have slowed significantly over the past year after topping out at US$5.8 billion in July 2018. Companies raised about US$11 million (RM45.1 million) in January, according to data compiled by CoinSchedule.

But CurioInvest and MERJ are betting that the value of rare and collectible assets — which includes vintage cars, wines, and jewellery, among other things — will continue to appreciate. Vintage cars, for instance, returned more than 330% in the 10 years through 2017, according to a report from Knight Frank.

The two firms are planning to bring as many as 500 collectible cars worth over US$200 million onto the exchange. The cars, of which a US$1.1 million Ferrari will be among the first on the slate to be tokenised, will be stored and maintained in a vault in Germany. Unfortunately, token holders would not be able to stop by to drive the cars.

“When you look at fine art, collectible cars, they have been perceived historically as safe havens,” said Fernando Verboonen, founder and chief executive officer of CurioInvest. “They’re held by very few and by bringing a different technology, we’re making it truly possible for everyone to benefit from those features or traits that define the asset class as a whole.”

Exotic cars have for years played a central part in the world of digital assets. In 2018, they became the ultimate status symbol for many rags-to-riches traders who built wealth in a field they hoped would dismantle the traditional world of finance. And the CurioInvest-MERJ partnership is not the first to issue a token backed by rare or collectible cars: BitCar, a blockchain platform, issued a White Paper on its collectible exotic cars token in 2017.

Among the newest batch of offerings is SardineCoin, a digital token backed by “vintage” canned sardines. It is being offered by MY Sardines, a Luxembourg company that is betting on the storability and durability of the densely-packed fish, which the company says can last hundreds of years as a collectible. There is also the Bananacoin, which is pegged to the export price of 1kg of bananas, and the notorious Dogecoin, which has a market capitalisation of close to US$300 million.

But the CurioInvest-MERJ venture stands out because it is properly regulated, said MERJ’s Needham.

“The technology is really only half of the story — the other half is about proper regulation,” he said. “You’re talking about a very well-regulated, well put-together offering that will be listed on a full securities exchange. I might be wrong but I think that is probably different to someone tokenising vintage sardines.” — Bloomberg