In Dubai property market, buyers switch to Stablecoins amidst Bitcoin price drops
Property owners who bought stakes using crypto are also cashing out
Dubai: With Bitcoin and Ethereum values under constant pressure, property buyers in Dubai are starting to use more of Stablecoins to complete their transactions. Stablecoins because of the way they are structured offer relative stability compared to the other crypto options.
Whatever be the case, buyers and sellers should exercise extreme caution when going in for crypto deals because of the ongoing volatility, market sources add. “There have been more instances of buyers cashing out their crypto-based investments into property, which in turn is increasing the number of property transactions,” said Firas Al Msaddi, CEO of fam Properties. “Both buyer and seller should use reliable OTC (Over the Counter) exchanges and brokers to make sure the cryptocurrencies being transacted are from legitimate sources.”
By cashing out, these property owners are ensuring that the value of their holdings are not held hostage by the volatility Bitcoin and other cryptos are facing. This is where Stablecoins serve a purpose.
The relatively stability offered up by Stablecoins - that's what is behind this switch from Bitcoin to pay off property deals
Chasing 'stability'
The typical Stablecoins getting used are the USDT and USDC – “they are being preferred because of their fixed value against the dollar,” said Al Msaddi. Unlike the Bitcoin and others of its ilk, Stablecoin prices are always linked to a fiat currency such as the dollar, exchange-traded commodities such as gold, or even a cryptocurrency.
Currently, there are more developers and landlords willing to accept payments through crypto, while the regulatory framework that will streamline such transactions are also on the way. Until that happens, all deals done exclusively using crypto must be settled through OTC exchanges and in cash.
Until it came crashing down to its current $25,000 plus levels, Bitcoin was the preferred crypto medium when it came to buying property here. It made sense at the time with Bitcoin values comfortably above $50,000 and then heading all the way to $68,000 in November last. There were entire property deals signed and sealed using crypto, primarily Bitcoin. Since then, the environment for Bitcoin and all other cryptos have got decidedly sticky on the price front.
“It will not be easy for Bitcoin with further interest rate hikes happening and investors worldwide wind down or cut their holdings in higher-risk cryptos,” said a property consultant.
"For a Dh1 million transaction made partially in cryptocurrency, such as Dh750,000 being paid in crypto and the remaining Dh250,000 in fiat currency, the process is relatively straight forward," said Tizian Raab, spokesperson at Azizi. "We as the developer accept the 10 per cent booking. We then give our customers the contact details of our external third-party exchange agency, which then converts the remaining 90 per cent into fiat currency for us in a matter of just hours. They receive a small commission for this service."
Await full regulatory rollout
In the UAE, the laws that will be the bedrock for the transition to a digital –driven economy are well underway, and this applies to crypto transactions too. “The UAE Central Bank has issued regulations regarding ‘Stored Value Facilities’ which include crypto currencies, as well as regulations for retail payments that take into account their use of crypto and digital assets,” said Samir Kanaan, Managing Partner at Kanaan Advocates and Legal Consultants.
“The Government of Dubai recently launched the Virtual Assets Regulatory Authority (VARA) at the Dubai World Trade Centre Free Zone to regulate virtual assets in the emirate. There are also initiatives by the various free zones such as the DIFC, ADGM and DMCC to provide the legal infrastructure and license the exchange of virtual assets and currencies in their respective free zones.
“We have seen certain businesses adopt their systems to allow payments by means of cryptocurrencies. Nonetheless, the adopters are relatively few when compared to the overall size of the market. A big reason why, is because the technology remains foreign to many, and the legal framework is still in its infancy.”
There are many companies which are being established here in the UAE to make it easier to exchange these crypto assets into official currencies quickly