Tokens: everything or nothing?

Ever since it was founded almost ten years ago, The Classic Car Trust has always looked ahead. Today, during a panel discussion at The Circle, it invited experts and collectors to discuss the highly topical subject of nFTs, non-Fungible Tokens, and the opportunities they could offer collectors.

By Renè Luchinger

IIt will soon be ten years since The Classic Car Trust (TCCT) was founded. 2018 saw the first issue of “The Key”, the magazine that gives a face to major collectors, the market and enthusiasts. Then two years ago we started eClassic, which gave a new digital dimension to the classic car experience. now the next innovation is knocking on our car door: nFTs. A “non-Fungible Token” is a digitally protected object on a blockchain that represents a real and unique asset, such as a classic car (see box).

nFTs could soon be relevant to every collection and every collector of classic cars; so the TCCT Leader Forum, which has always been quick to take on the big issues affecting the future of classic cars, was keen to explore the subject at this early stage. There are certainly plenty of questions; but many of the answers seem shrouded in uncertainty. What implications do electric mobility, state-of-the-art fuels and new urban mobility concepts have for the way we use our cars? How is artificial intelligence affecting the feel of driving a car? In particular: what impact is the change of generations having on the big international collectors, the top 100 of whom own around 3,500 of the most important classic cars in the world?

Motivated by a desire to find answers to the urgent questions being asked in classic car circles, Fritz Kaiser, the founder of TCCT, hosted another expert discussion in September 2021. This time it was held in St Moritz, and the subject was the issues surrounding nFTs and classic cars. He wanted the discussion to be a starting point and a spur to further exploration, the ultimate aim being to answer questions about the role nFTs could play for classic cars. perhaps they can even help people fulfil their dreams.

What if aficionados, young or old, could buy a share in a classic car? If collectors could put parts of their collection on the market to generate liquidity and increase the value of their treasured automobiles? If a previously inaccessible asset class could be opened up to new investors? perhaps the market for classic cars could benefit from this kind of disruptive restructuring to the advantage of collectors and investors, meaning that the value of historic cars from the 20th century could be main-tained and increased for future generations. A truly enticing idea. nFTs could be the key.

However, enticing and desirable though it may be, is it realistic? or is it just wishful thinking in a rapidly changing world? We wanted to find out, so we brought together a group of opinion leaders to talk about nFTs. Each bringing different voices and viewpoints to the topic. They included peppi Schnieper, partner at the consulting firm Bain & Company, who came up with a succinct summary of the potential for the classic car world: “Digital assets and the nFT market: out of the garage and into the cloud.” participants also included art consultant Bigna pfenninger, who gained crucial experience in the field when she tokenized a picasso; entrepreneur and investor Francisco Fernandez, who tokenizes physical assets on a regular basis. Michael Ringier, a lover of art and classic cars, brought his perspective as a collector, while Jack Little, manager at Sotheby’s, was able to share his views as a leading auctioneer of art and cars. Daniel Risch is the prime Minister of the principality of Liechtenstein, which has introduced progressive blockchain legislation. This room full of expertise on nFTs was chaired by Fritz Kaiser.

It’s worth starting with peppi Schnieper’s interesting update: in the 24 months between 2018 and 2020, capitalization of the nFT market strengthened from 41 million to 338 million dollars. This spring, an auction house sold an nFT by a digital artist, Beeple, for an impressive 69 million dollars. This suggests that nFTs have the potential to cause major waves, creating a new class of digital asset to generate liquidity for underlying assets. Even before the apparent nFT boom. Artemundi was starting to work on the first issue of art security tokens for a major art work.

“With this forum, we want to shed light on opportunities and risks of NFTs with classic cars. Perhaps we will soon launch a new initiative on this.”

Fritz Kaiser | Founder and Chairmen The Classic Car Trust

“In the 24 months between 2018 and 2020, capitalization of the NFT market strengthened from 41 million to 338 million dollars.”

Peppi Schnieper | Partner Bain & Company

“You can only earn money these days with cryptocurrencies. The NFT market is still in its infancy, there's no sign of a Big Bang.”

Michael Ringier | publisher, art collector, classic car lover

“The IPO for Picasso’s ‘Fillette au béret’ was based on security tokens. They are a piece of the real underlying Picasso.”

Bigna Pfenninger | Chair of the Management Advisory Council of Artemundi

“Liechtenstein has a progressive ‘Blockchain Act’ that gives juridical and legal security to digital assets.”

Daniel Risch | Prime Minister of the Principality of Liechtenstein

“Tokens are a game changer in all markets. In ten years’ time everything will have a token: Nestlé shares, works of art, classic cars.”

Francisco Fernandez | entrepreneur and fintech investor

“In the long term it will probably become increasingly difficult to keep iconic classic cars on the road.”

Jack Little | Senior Director Business Development Sotheby’s

“The Ipo for the painting ‘Fillette au béret’ by pablo picasso,” is what Bigna pfenninger, Chair of the Management Advisory Council of Artemundi calls this groundbreaking project. The picasso Ipo was successful and the painting has become the world’s first work of art on blockchain. Art investors can now buy tokens in the painting and trade them on the platform offered by the digital asset bank sygnum. The art tokens are bankable just like conventional securities, transactions on blockchain are legally binding, and the property rights attached to the issued tokens are guaranteed under Swiss “Distributed Ledger Technology” (DLT) legislation. “The tokens,” says Bigna pfenninger, “are not digital assets, but are a piece of the real underlying picasso.”

Could this blueprint be adopted by the classic car market, with nFTs based on real underlying Ferraris and Aston Martins? Without a doubt, according to Francisco Fernandez. The fintech investor calculates that there are more than 450 trillion dollars’ worth of assets in the world, of which 200 trillion are not bankable: art, real estate and intellectual property rights, for example. Block chain has made it possible to have new digitally tradeable asset classes, such as security tokens and nFTs, for these previously illiquid assets. “The inventors of blockchain and tokens wanted to decentralize assets,” says Francisco Fernandez, “so that access to these 200 trillion dollars of illiquid assets is not just confined to the owners but open to the rest of human-ity as well.” He also believes that people with money in their accounts would love to invest in portions of artworks or classic cars if they could – especially when their savings are attracting virtually no interest. As Adam smith showed us, if more people have access to an asset, but the supply remains limited, the value goes up even more. The opposite is also true: anyone who invests has to accept that values can fall as well as rise. Experience shows, however, that most people remain invested in assets that appeal to their head and heart. Fintech investor Francisco Fernandez thus has no doubt at all: “Tokens are a game changer in all markets. In ten years’ time everything will have a token: nestlé shares, works of art, classic cars.”

Michael Ringier, chairman of the Swiss publishing company with his name, art collector and classic car aficionado, is not so convinced. For him, collectors and speculators are in opposition. The former is interested in the art or the old cars, while the latter’s only motive is making more money. Collectors spend money on a passion that may possibly turn out to be a good financial investment – if they do somehthing right when buying, and if the item becomes desirable after a few decades. However, before anything else, the purchase is driven by a love of the art, or of the car, which makes the purchaser blind to the vagaries of market forces. The speculator, by contrast, is only focused on the market.

Michael Ringier says: “The people behind blockchain and nFT technology are obviously looking for a way to make money.” For him this brings together things that should be kept apart. He thinks this brings together things that should be kept apart. He believes nFTs, blockchain technology – or indeed any technology – does not produce art. The invention of the telephone did not produce any art. A work of art or a classic car has no intrinsic value; value only emerges if someone wants to buy and someone is willing to sell. Can this be profitably combined with the new digital asset classes? Michael ringier doubts it and believes that only cryptocurrencies can to some extent function as money earners. “However, there is still no sign of a Big Bang."

Tokens could be everything or nothing: our opinion leaders rate the chances for nFTs in the classic car world between these two extremes. no one has a crystal ball, of course, to tell us whether the new kid on the block – nFTs – will cut a swathe through the classic car market. In

Daniel Risch, Prime Minister of the Principality of Liechtenstein

Andrea Zagato, CEO of the historic Milanese coachbuilder

Paolo Pininfarina, President of Pininfarina S.p.A.

principle there is much to suggest that digitalization will make a breakthrough in this sector too. Legislation has caught up: Liechtenstein, for example, has a progressive “Blockchain Act”, which “gives juridical and legal security to digital assets”, as Daniel Risch, the principality’s prime minister, explains. There is the younger generation coming through that is very at home in the digital world. one of the forces that could accelerate the digital breakthrough comes from the collectors themselves. Several of our top 100 collectors are in the autumn of their lives and want to open up their collections to younger people. nFTs could represent an appropriate way for less wealthy car lovers to participate.

Then there are the three epochal challenges for the market and for classic car collectors as set out by Sotheby’s specialist Jack Little. Firstly: bioethanol, the fuel of the future, which is set to become the standard for private cars. However, this is no longer compatible with the internal combustion engines of the 20th century “so it will become increasingly difficult to keep iconic classic cars on the road,” says Jack Little. This is a problem, be-cause seeing the cars on the road is one important way of getting new gen-erations enthusiastic about classic cars. Secondly: Younger generations no longer show the same interest in driving classic cars as their fathers and forefathers. Thirdly: Today’s often elderly collectors were fascinated by the icons of their youth and it was often these gems that motivated them to become collectors in the first place. “These days,” says Jack Little, “we have to ask whether the same will happen with the old cars of the 1970s, ‘80s and ‘90s. This critical view from the specialist auctioneer is not an argument against the market or against collecting classic cars. In fact it shows that nFTs could be an important part of the solution.

one thing will never change: owning a piece of the DB5 driven by James Bond in “Goldfinger” will always be a priceless personal thrill. ■

Non-fungible tokens

Non-fungible tokens (NFTs) are unique, irreplaceable digitally protected objects. These unmistakable, uncopiable strings of code are deposited on a blockchain. They were originally used to identify digital files or computer-generated works of art as unique items, making them tradeable on specialist platforms. “Colored coins” were the precursors of the NFT. Developers of cryptocurrencies used them to expand the functionality of Bitcoin, creating tokens to represent other interesting currencies or assets on a blockchain.

Essentially, this makes it possible to merge the analogue and digital worlds on a blockchain, and allows NFTs to be used for almost unlimited purposes – especially if they are backed by unique, irreplaceable assets. These could be works of art or, indeed, classic cars. The cryptovalue of tokens could, for example, be used to open up the normally illiquid classic car market to many more people, providing collectors with liquidity. By tokenizing a classic, its digital ownership passes into the hands of many different part-owners, who can then trade their NFTs on specialized platforms. This creates a market and an opportunity to pass on classic cars – these prime examples of the 20th century art of engineering – to future generations, and make them less dependent on individual collectors. It is a way of preserving these treasures for longer.

Businessman Kurt Engelhorn, organiser of the Bernina Gran Turismo, with his wife Carmen and Fritz Kaiser