Non-Fungible Tokens (NFTs) as Art Loan Collateral
Financial Services Partner David Sofge co-authored an article in Business Law Today, an American Bar Association (ABA) publication, about key considerations for institutional lenders providing non-fungible tokens (NFT) art loans. The recent phenomenon surrounding NFTs has increased the likelihood that financial institution lenders will be approached by customers seeking to put up newly minted NFT-linked art collections as collateral.
Real-world art loans most often take the form of revolving lines of credit using works of creative visual art as collateral. However, when it comes to NFT-secured loans, a number of real-world techniques for evaluating requests for an extension of credit will need to be rethought and somehow accommodated. The considerations discussed in this article include ways to address risks related to provenance and authenticity, periodic appraisals to monitor changes in value, perfection of security interests and insurance for theft or loss.