The art market surrenders to digital money

While Christie’s and Sotheby’s embrace the future, critics warn of traceability challenges and possible money laundering risks

Andy Warhol became famous when exploring the bond between art and commercialism in his iconic dollar signal serigraphs. “Good business is the best art,” he used to say in a joke. If you lived today, the artist may replace the dollars with Bitcoin symbols, reflecting changes in the global financial scenario. Recently, the auction market has shown increasing interest in accepting cryptocurrencies as a form of payment, seeking to attract a younger and technologically engaged audience.

In an auction dedicated to artificial intelligence -generated art, closed on March 5, Christie’s, one of the world’s largest auction houses, has accepted cryptocurrencies in most available lots. Already Sotheby’s, leader in the sector, accepted cryptocurrency payments in all lots for the first time during an event held in February in Saudi Arabia.

Marcus Fox of Christie’s, notes that cryptocurrency holders are “becoming a more relevant portion of the population than four years ago, when they were still seen as a niche group little understood by the mainstream.”

The decision to adopt cryptocurrencies is based on a simple logic: auction houses sell art in exchange for money, and cryptocurrencies fall into this definition. Participating in auctions can be an intimidating newbie experience, but allowing cryptocurrency payments to reduce this barrier, increasing the likelihood that these buyers bid and return in the future. David Galperin, Sotheby’s Contemporary Art Head of Art, explains that “one of our main goals is to develop new collector bases and bring new people to the Sotheby’s ecosystem.”

The reasons for buyers to use cryptocurrencies can go beyond practicality. In many jurisdictions, when individuals sell their cryptocurrencies, they are required to pay taxes on capital gains. However, when using these coins directly to acquire art, some may try to avoid taxation while diversifying their investments (although this may result in severe penalties if they are discovered).

Another possible incentive would be to transform “dirty” cryptocurrencies into considered “clean” assets. Defenders of cryptocurrencies argue correctly that traditional money can also be washed.

Theoretically, cryptocurrencies should be easier to track, as their history is recorded in public blockchains. However, tools such as cryptocurrency mixers, which shuffle users’ funds and allow withdrawal with hidden origins, exist to circumvent this supposed transparency.

Both Sotheby’s and Christie’s claim that their processes of compliance and diligence are rigorous about cryptocurrencies and that they do not accept payments from mixer.

However, a prominent critic of cryptocurrencies warns that blockchain traceability can be manipulated “in extremely difficult ways to detect.”

According to The Economist magazine, the Trump government support for cryptocurrencies should further boost the art purchase trend using these digital currencies.

The conformity departments of auction houses will have extra work; companies in the sector will accumulate more revenues; and cryptocurrency enthusiasts will be able to display their new artistic acquisitions as part of their personal collections.