For just 18 bitcoin, a British-themed studio apartment can be all yours. And if you have 46 of these digital coins to spare, you can up it to a two-bedroom apartment. Some 150 homes at Aston Plaza & Residences in Dubai Science Park are available for purchase via the cryptocurrency, making it reportedly the world’s first major property development where virtual currency buys real estate.
The project offers buyers a chance to “realise their bitcoin gains with a good-quality, appreciating asset”. It is also meant to underpin the developer’s “strong commitment to the future of the cryptocurrency market and the bitcoin community”. As Michelle Mone, one of the British entrepreneurs behind the idea, tells CNBC, “Bitcoin is the currency of the future and it cannot be ignored.”
However, there’s another bit about bitcoin that also cannot be ignored: it is a highly volatile currency without any legal protections. Besides, many analysts believe that the crypto-bubble is about to burst. Jamie Dimon, CEO of JP Morgan, famously branded bitcoin as a “fraud” and claimed he would fire any employee trading in it for being “stupid”. Similarly, The Guardian newspaper recently summed up the bitcoin saga with a provocative headline: Bitcoin investors hoping to make billions may end up with a sack of fool’s gold.
So should you jump on the crypto-bandwagon for your property dealings?
Here are the pros and cons to dealing in bitcoin.
The upside
• Bitcoin transactions take mere minutes to process, and can be done from anywhere in the world at minimal or even zero fees. For property deals, the savings will be considerable.
• Real estate firms do not need to implement stringent payment card industry standards that are required for processing credit card data and other sensitive customer information. In fact, to process bitcoin transactions, all you need is an app on a smartphone or tablet.
• Bitcoin is powered by blockchain, which stores multiple records of every transaction, making the property deals resilient to hacks or human errors.
• Once it is confirmed by the bitcoin network, the transaction becomes final and irreversible. So real estate firms do not have to worry about fraud, consumer chargebacks or hackers using stolen credit cards.
• Since bitcoin is decentralised and not owned by any single entity, it is impervious to changing government policies, economic downturns, interest rates or hyper-inflation. For many, this makes bitcoin a truly global and safe currency to transact in.
• Since the blockchain records titles and ownership transactions — and this information is accessible to everyone — buyers can potentially save on title insurance.
The downside
• The legality of using bitcoin for real estate transactions remains ambiguous. While bitcoin is not considered illegal in most parts of the world, including the UAE, clear guidelines and regulations on its use are still a work in progress.
• For the government, it will be difficult to enforce tax laws on real estate transactions done by private parties.
• The cryptocurrency tracker, Digiconomist, estimates each bitcoin transaction consumes 250kWh of electricity, which is enough to power homes for nine days. And by 2020, the bitcoin network is expected to consume as much electricity as the entire world does today! This is clearly unsustainable, and it is unlikely green building projects would want to be associated with such a massive electricity-guzzler.
• Since a bitcoin transaction cannot be reversed, property buyers need to be careful about investing in ongoing projects — if the construction stalls or goes under, getting refunds could be an uphill battle.
• Moreover, since the value of the cryptocurrency tends to fluctuate wildly, arriving at the exact number of bitcoins to be paid back might turn out to be problematic — unless the property seller and the buyer have also agreed upon the value of the property in fiat currency.
• Bitcoin transactions are not linked to any personally identifiable information, such as a name, email ID or address. While this protects users from identity theft, the anonymous nature of the transactions has also brought bitcoin notoriety — the cryptocurrency is reportedly being used for money laundering, drugs trade and tax evasion. So real estate firms might need to implement additional know your customer (KYC) checks for bitcoin-funded deals.
