The world’s first trade finance-based non-fungible token transaction in 2021 highlights the need for treasurers to understand the technology behind tokenisation and the practical implications that it could have for corporate finance.
Non-fungible tokens (NFTs) have gained quite the reputation in the past year. Collins Dictionary has even gone so far as to name the abbreviation as its Word of the Year 2021, following an 11,273% rise in usage in the past 12 months. A type of unique token minted in a blockchain and using smart contract technology as a framework, NFTs have taken the art world particularly by storm. While the debate has raged over just how unique a digital image that can be easily captured in a screenshot can be, art-based NFTs can sell for big money. This was highlighted in March 2021, when artist Beeple’s digital NFT-based Everydays: The First 5000 Days image sold for just over $69m at Christie’s.
Jean-Baptiste Gaudemet, Senior Vice President Data & Analytics, Kyriba, says that beyond the art world, there is an even bigger potential for this technology that corporate treasurers need to be monitoring, particularly in trade finance. “An NFT can represent any kind of digital object, and that obviously includes validated purchase orders and validated invoices,” Gaudemet says.