It was announced earlier this week that a major property development company, the Knox Group of Companies, will accept payment in the digital currency ‘bitcoin’ for their new properties.
The company are planning to launch a new residential and commercial property development in Dubai. The new development will consist of two residential towers and a shopping mall, and will be historic for being the first major development to accept bitcoin as payment. The developers will offer studios for 30 bitcoin, and one bedroom flats for 50 bitcoins; at the current exchange rate, this is in excess of $220,000.
A London developer has also recently decided to allow tenants to pay their deposit in bitcoin, marking the first usage of the digital currency in the UK residential market. The developer issues a statement attributing the demand for this payment method to their international customers, indicating that whilst bitcoin is not currently a mainstream payment method for the UK, it could become so in the future.
What is bitcoin?
Bitcoin is a digital currency which enables peer-to-peer transactions via the internet, without an intermediary such as a bank. These exchanges are recorded in a public ledger known as the ‘blockchain’.
The future of bitcoin in mortgages
Whilst it is possible to use bitcoin to purchase in full or pay a deposit in some instances, it is not currently possibly to get a ‘bitcoin mortgage’, but the technology could be used in other ways. Some Hong-Kong based banks, such as HSBC, are looking to utilise bitcoin technology in their mortgage processes. Bitcoin offers a secure a low-cost transacting system, whilst the blockchain’s decentralised nature is appealing.
Lenders such as HSBC have considered using the blockchain’s public ledger to act as a database for property values, allowing lenders to check the database without sending a surveyor to the property.
This move may help to usher bitcoin into the mainstream of property purchases. However, the use of bitcoin as a currency raises serious legal and policy issues in the public finance domain—the technology has the capacity to grow and adapt faster than legal concepts can adapt.