BY Stuart Heaver on 3 Jun 2022

The rapid advance of cryptocurrency and blockchain technology is having a significant impact on the yacht industry

 

The world of yachting is about to be radically transformed by the recent advances in cryptocurrencies and digital assets, and experts warn that buyers and sellers may need to be prepared for some big changes.

Since 2008, when Satoshi Nakamoto published the seminal paper on Bitcoin – A Peer-to-Peer Electronic Cash System – crypto has advanced into the mainstream of business and economics at an impressive pace.

In April, digital payments platform Strike, built on Bitcoin’s Lightning Network payment protocol, announced an integration with e-commerce company Shopify, used by millions of online retailers worldwide. Big banks like HSBC and JP Morgan Chase are investing in blockchain technology and the metaverse. In March this year, US President Joe Biden issued a landmark executive order on digital assets, opening the door for comprehensive federal legislation, and paving the way for the United States to take a more active role in driving innovation and regulation in the industry.

The progress is welcomed by OSL, the Asia-Pacific region’s most comprehensive licensed digital asset platform – backed by Asia’s leading public fintech and digital asset company, BC Technology Group.

“OSL welcomes the Biden order as part of the inevitable global regulation of the digital asset ecosystem and the beginning of a new era in digital asset finance,” said OSL CEO Wayne Trench.

Digital broker Cloud Yachts presented NFT Project Metaverse, designed by Gregory C Marshall, for sale on the blockchain at Palm Beach International Boat Show in March 2022

The progress of blockchain and cryptocurrencies is undeniable, but what does this advance into the regulated financial mainstream mean for the yacht industry?

Firstly, the industry has seen a significant impact from high-net-worth individuals who have made their wealth in crypto or fintech. The stereotypical profile of new superyacht owners is no longer a retired industrialist or aristocratic playboy. It’s more likely to be a young tech entrepreneur aged in their 30s with a young family.

CEO of Fraser Yachts, Raphael Sauleau, recently told Yahoo Finance Live that young crypto investors and tech startup executives were fuelling the recent boating-industry boom.

“The background of these younger buyers is pretty diverse, but mainly [people] from internet companies, and obviously finance,” said Sauleau.

The progress of blockchain and cryptocurrencies is undeniable, but what does this advance into the regulated financial mainstream mean for the yacht industry?

Like it or not, this is forcing yacht brokers to gradually move to accept Bitcoin and other cryptocurrencies as a valid payment method. According to crypto website bitpay.com, using cryptocurrency to buy a boat provides the same benefits as any other high-ticket item like cars and real estate: fast transactions; low fees (typically one per cent with Bitpay); no paperwork and no complications or extra charges due to variable currency exchange rates.

Bitpay goes so far as to list a number of superyachts for sale on their website in partnership with brokers like Denison Yachting and Superyachts Monaco, who now accept Bitcoin.

Brokers and manufacturers in Asia will have to follow suit for fear of missing out on potential high-net-worth clients because Hong Kong and Singapore are viewed as hotspots for crypto and digital assets.

“We are not there yet, but we want to introduce it in the near future – much depends on the wishes of the boat’s owners,” says Laura Verbrugge, charter broker at Fraser Yachts in Hong Kong.

Digital yacht designs and yacht-inspired digital artwork are now offered via NFTs

According to industry insiders, blockchain technology will also have a profound impact on the regional yacht industry through the increasing use of non-fungible tokens (NFTs) – which will streamline the exchange of ownership and authenticity. These have mostly been used to trade unique digital artwork collections because NFTs allow businesses to create proof of ownership. NFTs are a hot asset class with sales reaching US$25 billion in 2021, compared with US$94.9 million the year before, according to data from market tracker, DappRadar.

Recently, digital yacht designs and yacht-inspired digital artwork have been offered via NFTs. Cloud Yachts joined forces with Denison Yachting to release original designs and artwork by award-winning yacht designers. However, they followed this initiative with a more radical innovation. Rather than using the NFT technology to exchange digital assets, why not build a real 63m superyacht and offer it for sale along with an NFT on the blockchain for US$95 million?

Project Metaverse by award-winning naval architect Gregory Marshall is pioneering the world’s first NFT superyacht new-build project. The client will customise their superyacht in the metaverse using the first-of-its-kind augmented reality technology. This is much more than a publicity stunt, and according to one Hong Kong-based crypto entrepreneur – this may be the first step to making yacht sales and yacht transfers via NFTs and blockchain technology standard.

Keen sailor Max Rebol is co-founder and CEO of Harbour Industrial Capital, a licensed Polkadot ecosystem development fund allowing investors access to the emerging Polkadot ecosystem. Polkadot is an open-source multichain protocol that facilitates the cross-chain transfer of any data or asset types.

Because NFT technology can allow title or deeds for property to be securely verified and transferred using proven blockchain technology, Rebol believes there will be an incentive to cut out the middlemen like lawyers, notaries and agents plus all the delays and extra costs with which they often associated.

“I can 100 per cent guarantee yacht sales and transfers will be on the blockchain within a short time,” says Rebol, who races a Mumm 36 sailing yacht at the Royal Hong Kong Yacht club.

According to Rebol, the yacht owner and vendor will just swipe the QR code on each other’s smartphone, and the job will be done, with the asset transferred – but he warns that the world is not quite ready at the moment.

“Unfortunately, we are not quite there yet because the courts do not yet recognise these smart contracts, so if there is a dispute, there may be no simple recourse mechanism to resolve it via local laws. But there is no reason at all why they should not be recognised,” he says.

The technology is there, though, so if both parties agree, they can do it today as a no-recourse deal. However, currently, there is no legal process for dispute resolution methods until courts recognise such a contract.

“It is completely secure, no transaction fees, no middlemen, no delays, and it’s private if you choose it to be – it’s definitely going to happen,” says Rebol.