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At the forefront of the future for collectibles-related fundraising: An exclusive face-to-face with Co-Founder of Coinllectibles

2021-08-01

When Elon Musk announced earlier this year that Tesla will start accepting Bitcoins as payment for its vehicles, the announcement took the crypto-market by the storm with value of Bitcoins and other cryptocurrency skyrocketing for a second time in history. It was also during this same period that Non-Fungible Tokens (“NFTs”) began to mainstream. It is therefore with great pleasure that our firm is able to provide our readers with first-hand information from one of the pioneer of NFTs in Hong Kong.

Seasoned securitisation veteran Julian So is pioneering the effort to thrust the use of blockchain and non-fungible tokens (“NFTs”) into the scene for collectibles and other related asset classes in Hong Kong and Asia. In a recent move, Julian has co-founded a blockchain company seeking to redefine and improve market practices in arts and collectibles with law and technology. His vision is simple yet ambitious: to apply the tools offered by blockchain to real world assets in order to solve real-world problems.


At the forefront of the future for collectibles-related fundraising: An exclusive face-to-face with Co-Founder of Coinllectibles


A vision for bridging the physical and virtual aspects of the collectibles scene

Throughout his career, Julian has always enjoyed the challenges of complex and cutting-edge legal applications on financial products through the use of technology, such as the securitisation of golf courses, credit default swaps, equity warrants, license fees, and movie box office and has always been curious about the interaction between law and technology.

Q:  What led to you making the decision to join the NFT scene?

A:  “When I heard about an NFT (Beeple’s “Everydays: The First 5000 Days”) being auction off at more than USD 69 million, I had to find out how it created so much value. The discovery was that, due to lack of proper legal documentation, and don’t get me started on “smart contracts”, the NFT holder may not have fully understood what he bought made me decide to do a deep dive into NFTs,” Julian adds.


Disrupting the collectibles scene in Asia and abroad with Fusion NFTs

Q:  What is Coinllectibles doing that other players in the NFT scene is not?

A:  Coinllectibles presently does not have a marketplace and is not issuing any utility tokens. Coinllectibles is more concerned about solving real world problems in the collectibles industry such as authenticity, provenance and valuation. Coinllectibles is focused on the bespoke minting of Fusion NFTs that are ownership titles to high-value art and collectibles, according to Julian. For instance, it was recently announced that it will mint Fusion NFTs for exclusive artworks created by Singapore finger-painting artist Adeline Yeo Matsuzaki. Coinllectibles is also presently the only publicly traded Fusion NFT blockchain company in the world.

Q:  What makes Fusion NFT stand out from ordinary NFTs? What are their differences from an intellectual property and proprietary ownership perspective?

A:  “The benefit to anyone buying Fusion NFTs over ordinary NFTs is that each Fusion NFT not only contains a smart contract (which is really a bunch of codes automating a transaction), but also proper legal documentation embedded into the Fusion NFT and immutable on the blockchain that unequivocally transfers the ownership of, and the rights in, the collectible to the holder of the Fusion NFT, providing a legal framework that protects the proprietary right in that particular piece of collectible behind the token”.


Tackling the key issues behind the proliferation of NFTs

With the proliferation of NFTs, challenges already faced by stakeholders in the cryptocurrency scene will also become relevant to those wishing to establish their presence in the art and collectibles scene.

Q:  In the context of Hong Kong’s legal landscape, are there any regulatory concerns regarding the use of NFTs?

A:  The answer to this question lies in the nature of an NFT. An NFT is only a tool made possible by blockchain technology. If it is used as a security, then securities regulations must be observed. If it is used as an ownership title to a collectible, then I don’t believe there are any regulatory concerns.

Q:  What are the solutions to tackling the design, fundraising, and legal issues behind making NFTs in general a commonplace means to raise funds from assets?

A:  “If NFTs are used as a fundraising tool, then we will need to determine the nature of the NFTs minted. For example, some companies are proposing to fractionalise collectibles with NFTs. Such NFTs could be deemed to be securities because they are technically derivatives and securities regulations would apply. The key is to seek legal advice before embarking on any NFT project”.


How will NFTs shape the mode of fundraising for collectibles and beyond?

Towards the end of the interview, we engaged in a more forward-looking discussion on how one should position NFTs and the usage of blockchain technology in the arena of fundraising for different types of assets.

Q:  What is the upside for utilising NFTs and other blockchain-related technologies over traditional forms of fundraising, such as securitisation and equity offerings?

A:  “The two biggest advantages would be (1) NFTs and tokens are traded 24/7 giving a holder non-stop trading access and (2) access to the presently USD 2.5 trillion market cap token owners. If done properly and in full compliance with all applicable security regulations, I cannot see any reason why the use of NFTs or other blockchain technology cannot replace traditional fundraising offered by IPOs today.”


Conclusion

At the end, he shared his vision for the use of NFTs in fundraising for different asset classes: “If done properly and in full compliance with all applicable securities regulations, I cannot see any reason why the use of NFTs or other blockchain technology cannot replace traditional fundraising offered by IPOs today.”

The tremendous interest in NFTs highlights the fact that the digital realm continues to rock the boat on traditional corporate finance practices. As sanctions and foreign policy uncertainties creeps into the financial market systems, it is interesting to note that the virtual markets lie surprisingly unaffected and undisturbed by the wider storm brewing on the international stage.

It is during these uncertain times that innovative products the likes of NFTs may take centre stage and lead the future of digital/technological financing (all the while reducing carbon footprint from all the paper saved in the process)!

Mr Julian So is a Consultant at ONC Lawyers. He specialises in banking (bilateral and syndicated loans) and structured finance.

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