At a time when art museums are facing substantial financial shortfalls due to the pandemic, can NFTs (nonfungible tokens) generate the revenue they sorely need? And what’s holding museums back?

1 Legal tangle

What sets NFTs apart from cryptocurrencies like bitcoin and ethereum, which are designed to be interchangeable, is that each NFT represents a unique asset. Figuring out how NFTs must be treated, held and valued is hard, and the ability to quickly mint NFTs for auction is not something that may come naturally to museum staff. What’s more, NFTs are typically bought and sold with crypto-currencies, and not many organisations — including museums — regularly make transactions using them. There are legal complexities and insurance complications.

2 Risky bet

Though the high prices they can fetch are eye-catching, there are countless cases of NFTs that quickly become worthless. As with cryptocurrencies, there’s lots of volatility.

Relying on NFTs to raise cash may also be risky. The boards of museums may determine that it’s inappropriate for their charitable organisation to own them which means museums may be forced to quickly liquidate any NFT they mint or receive — even if that sale will make the NFT less valuable to the institution.

3 Artist vs institution

The market for NFTs tied to artwork has thrived because buyers view purchasing and holding an NFT as a means to interact with and financially support the artist. More broadly, the ethos is one of decentralisation. NFT buyers are less likely to be enthusiastic about an intermediary joining the fray.

4 Putting a price to it

Museums need to see whether monetising their existing collections would undermine public access to collections — potentially violating their missions and bylaws. There’s also a risk that it could inadvertently lead to pieces of the collection being treated as financial instruments if income is being generated from them rather than solely serving as items on display for the public.

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