Cryptocurrencies have promised much but delivered few real-world benefits – until now.
In fact, it’s now possible to buy property with bitcoin, the largest and most popular digital currency. The Knox Group of Companies, headquartered on the Isle of Man, is about to build a residential and commercial property development in Dubai valued at US$407 million and offer residences that can be bought with bitcoin.
The 22.3-hectare property venture, called Aston Plaza and Residences, will consist of two residential towers and a shopping mall, and will reportedly be the first major real estate development that will accept bitcoin as payment.
Making it real
The project is helping push bitcoin into the mainstream as until now, one of the biggest drawbacks of digital money has been worldwide resistance to them becoming fiat currencies.
A fiat currency is pushed into circulation by a government issuing debt and/or demanding taxes in that currency. The need to obtain fiat currency to pay taxes is what makes it valuable, and central banks typically manage its price and quantity.
Cryptocurrencies threaten the established system by circumventing it, relying totally on technology to process and protect transactions. However, the boom in cryptocurrencies and their underlying technology is becoming too big for central banks to ignore.
The value of a bitcoin surged more than 400 per cent to a record US$6,077 on 1 September and the US dollar value of the 20 biggest cryptocurrencies is now about US$150 billion, according to data from Coinmarketcap.com.
China is home to vast cryptocurrency mining operations and the biggest exchanges. The People’s Bank of China is also testing its own prototype cryptocurrency and may become the first major central bank to issue digital money.
Total cryptocurrency market capitalisation
The attraction of the virtual currencies for many remains speculation, rather than for buying and selling goods. However, the Dubai property development shows this is also changing.
“This is a great opportunity for the cryptocurrency community to offload some of its significant gains, especially the early adopters, and actually deploy them in hard-core assets,” Knox’s chairman, Doug Barrowman, said in an interview with Reuters.
Buy one for 33 bitcoins
Bitcoin’s online payments platform BitPay will process the bitcoin transactions for the Dubai property. The company already provides bitcoin payment tools to companies such as Microsoft and Richard Branson’s space venture, Virgin Galactic.
Bitcoin’s value in US$
Studio apartments will start from 33 bitcoins and packages for interior design services and furniture can also be paid for in bitcoins. One-bedroom apartments can go for about 54 bitcoins, or US$250,000, while two-bedrooms can be bought for 80 bitcoins, or $380,000.
In Australia, there has been less official and corporate interest in the currencies themselves than in what powers them – the so-called blockchain, or distributed ledger technology. But there is no doubt that cryptocurrencies are growing in influence and Australia’s regulators will have to get their act together quickly.
The arrival of Amazon’s distribution centres in Australia may be a catalyst for increased cryptocurrency use as there would be fewer fees for overseas online purchases. Other benefits locally may be that cryptocurrency transactions are generally free to execute and there are fewer business fees and no ATM fees.