Why crypto millionaires are having trouble buying prime property

But one unsuspected hotspot might soon become the hub for super-rich crypto buyers.


While the tiny, beautiful Caribbean island of Bequia is well-known among the Mustique crowd out for the day on their yachts, it is about to gain new-found notoriety as home to the world’s first crypto community.

At One Bequia (onebequia.com), a new development due to complete by late 2024, everything from the villas priced $950,000-$2.3m, to the rum punches and spa treatments can be bought with Bitcoin (or conventional dollars, for the unconverted).

“We provide you with our wallet details. You send us the agreed bitcoin and we then convert it to US dollars using our regulated money service brokers,” says One Bequia’s developer Storm Gonsalves, son of the prime minister of St Vincent and the Grenadines, Ralph Gonsalves.

It’s no gimmick, Gonsalves assures, but a response to the growing problem of “derisking” that small island nations face, where big banks are withdrawing their services from small, island-based community banks.

The island of Bequia.

“They are increasingly cutting us off from mainstream banking facilities and, ultimately, from international trade and commerce,” says Gonsalves. “It has pushed many Caribbean nations to adopt blockchain and other cryptocurrencies a lot faster than more developed nations.

” So far, enquiries for One Bequia have mostly been from men in their mid-20s to mid-50s, says Gonsalves. “Many of them are early technology adopters but don’t necessarily have tech-focused jobs. They are lawyers, property developers or simply crypto investors.

”Besides the banking issues that small Caribbean nations face, his plans to turn Bequia into “Crypto island” is about educating a wider audience that bitcoin is the future of property buying. “We’re not only pioneering a new way of financing a development but a new way in marketing it – to bitcoin users,” he says. “In years to come, this will become standard practice."

So far, enquiries for One Bequia have mostly been from men in their mid-20s to mid-50s

For now though, buying property with bitcoin – or any other cryptocurrency – is still a very niche pursuit. The developer Nick Candy is an exception. He has called bitcoin “a big opportunity” and will welcome a crypto buyer with open arms for his £175m penthouse at One Hyde Park in Knightsbridge.

But most agents and vendors in London’s prime market have little trust in online currency. “We received an offer two weeks ago on a large penthouse in central London from a buyer in his mid-20s who had just sold his share in a gaming company for several tens of millions of dollars. He suggested making payment with bitcoin,” says Marc Schneiderman, director at Arlington Residential. “The vendor, in his late 60s, was a very successful equities trader, but he felt it too erratic a currency. There is clearly different thinking among old and new money.

 Bequia, soon to become "crypto island"

Silvina Paz at Address Property Consultants – who says she is aware of only one crypto property purchase in London so far, a house in Notting Hill – finds it hard to imagine crypto will become “a standard way” of paying for a property. “Most of the market likes ‘clean’ transactions that are easy to understand and transparent, and bitcoin attracts all sorts of negative connotations,” she comments.

In a sphere in which anti-money laundering (AML) is already a big issue for agents, “bitcoin adds another layer of complexity,” says Paz. “The buyer has to first prove the original source of money is legit. Then if the profits have come from selling cryptocurrency, they will have to prove that too. It’s cumbersome.”

The other huge worry is volatility, as this week has shown. Between Elon Musk declaring Tesla will stop accepting bitcoin payments for its cars, due to environmental concerns over digital ‘mining’, and China (where cryptocurrency trading is illegal) imposing further curbs on online trading, bitcoin’s value fell by 30% in one day and is at its lowest in three months.

“It’s quite likely that the value of bitcoin will change between the offer being accepted, the deal exchanged and finally completion,” says Paz, an Argentinian who knows all about volatile currencies. “To use bitcoin as a means of payment, you would have to have some  mechanism where no matter what happens to its value, the transaction will go ahead in a fixed amount in Sterling or dollars.”

Some major players in the luxury London market accept, though, that cryptocurrencies are the future. “I’d rather be ahead of the curve. You can’t ignore it,” comments Dean Main, founder of Rhodium, a management company with £11bn of super-prime London property under its wing.

Main’s scepticism over cryptocurrencies was swayed when he was in Israel three years ago and he came across bitcoin cash machines in shops. “I bought £100, which I could then withdraw in cash in the local currency. Big companies are now starting to accept and trade it. We’ll see governments bringing out their own version of coins. Bitcoin is here to stay,” he says.

Main is wary of other cryptocurrencies such as Dogecoin, which was created as a joke by two techies to make fun of the wild fluctuation in such currencies and is now worth around $85bn. “I would accept bitcoin as rental payment,” says Main, who wears another hat as a developer of super-prime London properties that rent out for tens of thousands a week. “I would convert it straight away. I wouldn’t sit on it. But many millionaires and billionaires are making money from it and they could be a renter for one of my properties, so I want to keep my audience open.”

With four percent of the UK population owning cryptocurrency, according to the FCA, it’s a payment trend that could apply to a “significant number of high net worth clients” and one that real estate businesses can’t afford to ignore, thinks Katharine Wooller, managing director UK & Ireland at Dacxi, a crypto wealth-building platform.

“Fans of crypto, such as myself, appreciate bitcoin as a faster, more efficient way of moving value. As long as the required AML checks are adhere to, it is a streamlined global system that will create borderless transactions at the touch of a button,” she says. “And blockchain technologies are an interesting solution to inefficiencies in property transaction, asset management and payment infrastructure, all of which are ripe for disruption.”

Crypto property buyers are certainly out there, too. Guy Meacock, director of Prime Purchase buying agency, is helping a wealthy Australian to spend £10m on a London property. “He has made all his money in cryptocurrency and has a similar budget to spend in a number of global cities,” says Meacock.

And Adam Deering, the Dublin-based head of Deerbank Capital, has recently helped one “high net worth investor from Surrey” buy land in Barbados with bitcoin. “I will take investors’ deposit in bitcoin and pay the vendor in US dollars, in the case of the Caribbean purchase, or in Sterling for three refurbished blocks of flats in Manchester that we have coming to the market in the next few weeks,” he says.

For Deering, bitcoin is preferable to conventional currency. “I can send it in seconds, whereas if I’m transferring large sums of traditional currency through a bank, I have to call or go in person. And it has the potential to go up in value.” Charles Curran, chairman at Maskells estate agency in Chelsea, has yet to be convinced. “With the difficulties in proving the source of funds and the volatility, the question is really, why would a vendor go to that trouble? Let the buyer convert it first and then pay in cash.”

In the luxury property world, a new battle between old money and new is just beginning.


Source: https://www.telegraph.co.uk

Original article: https://www.telegraph.co.uk/luxury/property-and-architecture/crypto-millionaires-having-trouble-buying-prime-property/

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