Exports to UAE rise, but banking regulations and other factors blamed for fall in Swiss business
Customs figures for 2018 show the first signs of recovery in UK art market activity since 2015 but also highlight a marked decline in business with Switzerland, a key trading partner. However, exports to the UAE rose significantly.
Global exports of art and antiques from the UK were up 5.5% at £5.1bn, while global imports rose by more than 20% to £2.1bn. This compares with the 2.2% decline in exports and 21% fall in imports in 2017. (Figures represent the total value of art moved across the UK border, whether by sale or loan)
Most marked was the increase in exports to the UAE following the opening of the Louvre Abu Dhabi in November 2017. £78.2m worth of pictures were exported from the UK to the UAE last year, up from just £13.3m in 2017. The total value of fine art exported to the UAE from the country in 2018 was £83.4m, compared to £31.1m in 2017.
©Ivan Macquisten 2019
©Ivan Macquisten 2019
The UK’s chief trading partners remain the US, Hong Kong and Switzerland — all leading art market hubs. However, while total exports to and imports from the US rose by more than a quarter, figures for Switzerland fell dramatically. Picture exports there fell by more than 30%, at £532m, and imports by more than 40%, at £282.4m.
One Swiss dealer, who asked not to be named, said that the biggest single reason for this was probably changes in the country’s banking laws. “Switzerland was traditionally a place where dealers from other countries could set up shell companies to store assets as a means of avoiding tax,” he says. “However, Switzerland has dropped its banking secrecy laws and that means an end to anonymity, so companies can no longer conceal their ultimate beneficiaries.”
The dealer added that the bureaucratic burden now placed on those wishing to trade in Switzerland or deposit money was equally a deterrent: “The due diligence has become super efficient and demanding and takes much more time to complete. This could make using freeports in Luxembourg or Singapore much more attractive.”
Problems with freeport’s won’t have helped
Damaging headlines linked to freeports will not have helped either. The European Commission president Jean-Claude Juncker has recently defended the Luxembourg freeport, set up during his premiership of the country, against calls for a fraud investigation from the German MEP Wolf Klinz.
The fall in the value of the pound could also be a factor, the dealer argues, making New York more of an attractive option than London when it comes to exporting works of art for sale.
Other changes in Swiss banking and residency laws have made it less attractive for collectors to move their art holdings there for safekeeping.
Another Swiss dealer, who also did not want to be named, agreed with the first, adding that the Swiss Federal Office of Culture’s increasing interference in trade was having a damaging effect.
The customs figures measure the registered value of goods crossing UK borders rather than sales, although they tend to reflect market trends and spheres of influence.
Intrastat rules govern what is reported in customs figures for the movement of goods between the UK and EU countries — classed as arrivals and dispatches rather than imports and exports, These do not cover anything like the entire value of goods moved within this sphere, which is why totals seem so low comparatively. However, they can provide useful information on trends.
Exchange rate movement appears to have aided recovery
Part of the general recovery is probably attributable to the rise in the average sterling-dollar exchange rate across the year*. Despite a weakening pound since April, relatively high values in the first quarter of 2018 gave rise to a yearly average of $1.33 to the pound, compared with just $1.28 across 2017. A sharp fall in the average rate in May 2018 would also have made London a more attractive place to bid during the height of the summer auction season.
The UK market has some way to go to regain the 2015 peak, where exports nudged £5.8bn and imports £3.6bn, but these trends also tend to follow global market shifts. As the accompanying graphics show, the UK market has some way to go to regain the 2015 peak, where exports nudged £5.8 billion and imports £3.6 billion, but these trends also tend to follow global market shifts.
If the UK does leave the European Union this year, Intrastat will no longer apply, with shipments to and from the EU 27 reverting to export and import status, which is likely to affect the reporting of customs figures at least in the short term.
* Source: X-RATES
A version of this article first appeared in The Art Newspaper in April 2019
Safe, stable, liquid and easy to use for day-to-day spending – meeting the crypto currency challenge
A few days ago, when bitcoin values slumped overnight, the former CEO of PayPal, Bill Harris, reportedly dismissed the crypto currency as “a useless payment mechanism”.
“The cult of bitcoin [makes] many claims – that it’s instant, free, scalable, efficient, secure, globally accepted and useful – it’s none of those things,” Harris told CNBC’s Fast Money programme.
Well, as the ex-boss of a global payment system challenged by the whole concept of crypto currency, he would say that, you might argue.
However, Harris has a point. The real challenge for an alternative global system of value exchange is not for it to be a wealth creation exercise for the elite, but an effective method of transfer that is stable, cannot be manipulated by institutions or governments, protects the individual, has an intrinsic value and can be used quickly for ordinary, day-to-day transactions.
It should also act as a barrier to crime, particularly money laundering and terrorism financing, and offer a reasonable alternative to expensive wire transfers for the ‘unbanked’.
That is why I have become involved in the programme to promote Kinesis, which has the potential to achieve all of these objectives.
Being hailed by its developers as a “blueprint for the future of money”, Kinesis is a wholly integrated value exchange system linking to a globally accessible crypto currency directly backed 1:1 by hard assets in fully insured gold and silver held in third-party vaults across the world, giving it an intrinsic value. These holdings will be subject to semi-annual third-party holding audits. To put that in perspective, the last full audit of the gold held in Fort Knox took place in 1954. The Kinesis system is ethical because it’s based on LBMA (London Bullion Market Association) bars, and it’s officially recognised via the legacy system, with all associated taxes paid.
In short, Kinesis is an ethical system that enhances money as both a store of value and a medium of exchange.
This is not a gimmick that has suddenly emerged from nowhere, but a system carefully devised over seven years, based on London’s accredited Allocated Bullion Exchange (ABX), the world’s leading electronic institutional exchange for allocated physical precious metals.
It will employ bespoke block chain technology to ensure global security.
Kinesis can never be sold below the current price of gold or silver
“We provide a value and a unit of account and we solve the medium of exchange issue, while the system produces a yield,” says Kinesis CEO Thomas Coughlin.
The only way to bring this currency to the people is to digitize it and allow it to trade in very small amounts.
Kinesis can never be sold below the current price of gold and silver thanks to the direct allocation policy, which gives it stability. Transactions take just 2-3 seconds and are proportionate to what you are buying, so, unlike other crypto currencies, this one can actually be used in day-to-day transactions like buying a cup of coffee.
And when you pay over the currency unit, which can be allocated using your Kinesis debit card, you are also paying over that percentage share of the gold or silver that goes with it, gram for gram. At the same time, transactions costs* are a fraction of alternatives, making the whole system viable for day-to-day use in even small amounts. The Kinesis debit card can also be used to access cash at ATMs.
Another incentive to use the system over others is that all of those involved in it are paid a fractional share of the transaction fees, making it a unique multifaceted yield system. This promotes the growth and use of Kinesis as a medium of exchange while distributing back the wealth to the system’s users, encouraging the rapid movement of money around its network.
What this also means is that for the first time ever precious metals attract yield as physical assets in a way that encourages trade and transactions.
What’s more, Kinesis is Sharia compliant because it makes its yield from transaction fees not interest.
One of the Kinesis currencies’ (1 KAU = 1 gram of gold and 1 KAG = 10 grams of silver) most important features is the security they provide for users.
With unbacked crypto currencies, the title can be held by the exchange and the end user holds a warrant to that title. This is why crypto exchanges get hacked, because they are effectively treasuries.
Likewise, depositing money in a bank in the traditional way effectively means taking on bank risk where you are exposed above the guarantee limit. Kinesis does not expose you in this way because it is backed gram for gram by gold and silver. There is no counter-party risk because the depositor retains title to the gold and silver represented by their deposit. With paper deposits, the bank retains title and issues a warrant of title to the depositor. If the bank fails, the risk is passed on to the paper depositor above the guarantee limit. Remember the Cyprus depositors of 2012-13, who lost access to their funds and took a government-sanctioned ‘haircut’? With Kinesis, that can’t happen.
Other new developments in crypto currency are trying to build in stability by pegging themselves to fiat currencies, but that will leave them exposed to the usual banking risks detailed above.
The fractional cost of transactions also make the Kinesis system far more attractive to the ‘unbanked’, like migrant workers wanting to send funds home to their families in other countries. Currently, they are forced to use services like Western Union, which can charge anywhere between 5% and 25% of the money being transferred in fees, whereas Kinesis fees are limited to 0.45%.*
ABX has already raised the entire call for backing it needs to launch the system (around $250 million) through the issuing of Kinesis Velocity Tokens (KVT). It will continue to sell KVTs up to the limit of 300,000.
How Kinesis Velocity Tokens work
KVT holders are effectively stakeholders in the success of the system and will receive a 20% proportional share of the transaction fees from the Kinesis Monetary System ongoing. The more successful the system, the more money KVT holders stand to make. But what is different this time is that ABX has prevented institutions from muscling in and taking a concentrated position, scooping up huge holdings of KVT, which would risk compromising the system. Instead they have prioritised small investors. Institutions can get involved, but allocations to them have been strictly limited to ensure genuine system independence in the future.
Unlike bitcoin, Kinesis does not use up vast amounts of energy in the ‘mining’ process. The process is a simple one of exchange: you buy it with fiat currency.
Why would countries back you when what you are doing would limit their ability to control currency? Because most governments hate cash as it limits their ability to fight crime like terrorism. Kinesis digitises the system and anyone who wants to participate has to go through a vigorous Know Your Customer (KYC) process, working through Unified Signal, before they can gain access to it. Unified Signal control every cell phone for billing in the US, as well as the medical systems for the US, and provide the digital wallet through which Kinesis operates. This means there is no way of laundering the money through the system. You have to establish credibility before you are allowed to join. It also means that governments who adopt Kinesis will be more empowered to tackle tax evasion and terrorism financing, while generating additional income from transaction fees as a system user. Think how that could transform the fortunes of African countries currently beleaguered by corruption and the wholesale plundering of their assets.
It doesn’t take a genius to see how this could have additional applications in areas such as provenance and international transactions for the art market, another area of great interest to me.
So who has Kinesis convinced so far?
Well, the Indonesian Post Office for one. It has signed up to use Kinesis in the handling of its $12.5 billion of assets. Deutsche Bourse is set to become a liquidity provider to Kinesis too.
With an unblemished track record, which it is vital to retain, there is much at stake for the ABX in the intrinsic reliability and honest robustness of Kinesis.
Credibility and reputation at work
And look at the Kinesis advisory board. Among others, it includes Andrew Maguire, arguably the most important whistle-blower in the history of bullion banking, who in 2010 exposed the manipulation of the precious metals markets to the US Commodity Futures Trading Commission (CFTC). He effectively risked his life to do this when, instead, he could have sat back and exploited his knowledge to makes millions but was sickened by the cost in broken lives that the corruption and manipulation of the silver markets led to.
Other members include Padraig Seif, CEO of Finemetal Asia Ltd, and Axel Diegelmann, MD of Trisuna-Lagerhaus AG and co-founder of the Lichtenstein Precious Metals Group). Watch this space for additional names with game-changing reputations to be added to that list.
As confidence in the traditional banking system wanes further and existing crypto currencies continue to give the impression of Wild West gambling dens, trust, reliability and stability have never been more important.
Kinesis has impressed me more than any other proposed value exchange system and shows the best chance I have seen of solving the problems that dog other forms of banking, investment and exchange. That’s why I’m putting my money where my mouth is.
The Kinesis Monetary system explained (1.55 mins long)
Kinesis yields explained (1.38 mins long)