Republic – the financial services company, not the record label – has announced the launch of “Republic Music,” a loosely defined investment product that claims to offer “an entirely new way to create, produce and share royalties from music.”
The idea revolves around something called “S-NFTs,” or “Security NFTs.”
New path for NFTs?
NFTs are non-fungible tokens – a kind of cryptocurrency that can be attached to media files and treated as proof of ownership. Crypto companies usually argue that NFTs are not securities, since securities in the U.S. need to be regulated by the Securities and Exchange Commission (SEC).
Republic seems to be taking the opposite tack, leaning into the idea that these S-NFTs are a kind of security – something you can invest in with the expectation of profit down the line.
“The songs are going to be placed in an LLC, and you will be a member of the LLC,” said Pialy Aditya, Republic’s chief strategy officer, in an interview. “You will have a share of ownership in that song, and a right to the royalty on the back end.”
That means S-NFTs are overseen by the SEC and the Financial Industry Regulatory Authority (FINRA), the finance industry’s self-regulatory body; investors based in the U.S. will need to comply with relevant KYC / AML (know your customer / anti-money laundering) regulations before they can get a piece of the action.
It hinges on what’s known as “Reg CF,” or “Regulation Crowdfunding,” which lets private companies raise up to $5 million from non-accredited investors in Kickstarter-like campaigns.
Republic also says it’s brought on rapper and one-time Donald Trump affiliate Lil Pump to sweeten the deal.
“As part of the first wave of planned releases, Lil Pump is offering fans and investors the opportunity to be part of his forthcoming single ‘Mona Lisa (feat. Soulja Boy)’, produced by Jimmy Duval,” a press release said.
More recently, crypto-conscious DJ 3LAU rolled out a similar royalties play called Royal, which bypasses the securities angle entirely.
Republic considers its music platform a “vertical” of its primary investment business; it’s planning several other verticals geared toward fractional investments in different aspects of the creator economy.
“I think in the New World Order, early supporters are going to be rewarded, the artists are going to get paid and the community is going to grow stronger,” Republic’s Aditya said.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.