Should property developers accept Bitcoin as legal tender?
A crypto winter’s tale23rd Jun 2022
The price of Bitcoin recently dropped below $20,000 (R318,366) – its lowest level since November 2020. It’s not only the most famous coin that’s lost some value as other digital currencies have seen their value reach zero.
Understandably many consumers, businesses and traders have lost a bit of confidence in cryptocurrencies of late.
So, what is its future, and should the development industry still accept it as legal tender?
Local crypto uptake
Last year student housing specialist Quorum Holdings claimed that it was the first in South Africa to accept rental deposits in cryptocurrency. It has a growing portfolio which is expected to reach around 3,000 rental units in Johannesburg over the medium term and another 5,000 beds in student accommodation through subsidiary Urban Circle.
Quorum Holdings added that the deal would allow tenants to potentially benefit from an increase in value in the cryptocurrency.
At the time Saul Mayers, group legal of Quorum Holdings argued that their typical tenants, who are young professionals, would be familiar with crypto and may want to use theirs as a deposit instead of cash.
Fast forward 10 months after the announcement and take and the option remains in place but take up has been non-existent. Mayers admitted to Estate Living: “We have had a few tenants enquire but none so far have paid for deposit in Bitcoin.”
When asked what would happen if the value of Bitcoin were to go down, Mayers said: “The offer remains that to the extent that the price of Bitcoin dips significantly such that the rand equivalent of the Bitcoin originally deposited is below the deposit amount, the company shall be liable for the shortfall.”
Globally, developers, property sellers and other retailers have also started to offer the option of cryptocurrency as legal tender. Just a few months ago, a property in Braga, Portugal was sold for three Bitcoins – equal to around €110,000 (R1,849,577.40) in a historic crypto-only sale, according to finbold.com.
In Brazil Gafisa, one of the country’s major real estate developers, recently took it one step further from deposits.
Gafisa announced that it would accept payment for apartment purchases, according to finbold.com. All potential purchasers must do is fill out an intent form before they can pay for the apartment with the cryptocurrency.
In a note, UK based digital asset broker GlobalBlock highlighted how the UAE is also fast becoming a crypto-friendly area with Dubai-based luxury property developer DAMAC making $50m (R796m) in property sales settled with crypto this year.
What’s more, the country’s retail giant Majid Al Futtaim has recently partnered with Binance to accept cryptocurrencies at its 29 malls and 13 hotels
Recession impact on crypto
There are concerns that the cost-of-living squeeze and possible ensuing recession could have a negative impact on cryptocurrencies. To get ahead of this, one of the most popular crypto-brokerage businesses, Coinbase, has announce plans to lay off about 18% (equivalent to 1,100 employees) of the company’s staff.
CEO Brian Armstrong warned in a blog post: “We appear to be entering a recession after a 10+ year economic boom. A recession could lead to another crypto winter and could last for an extended period.
“In the past crypto winters, trading revenue (our largest revenue source) has declined significantly. While it’s hard to predict the economy or the markets, we always plan for the worst so we can operate the business through any environment.
While developers, retailers, malls, and other service providers are expanding what they accept as legal tender it’s clear that those in the heart of the crypto industry are starting to get jittery for the headwinds that lie ahead and that this could have a knock-on effect.
The payment infrastructure and acceptance of cryptocurrencies like Bitcoin has improved, but developers still have some way to go before they can convince consumers to make use of it regularly when it comes to purchasing properties or putting down deposits.