Property developer speculates

A London property developer is to allow its tenants to pay their deposits in bitcoin – the first time the virtual currency has been used in the UK residential homes market.

OK, right….it’s a deposit note.

The standard deposit is £500 – for all unit types and sizes – and The Collective has pledged “spot conversion”, which means it will bear any financial risk while holding the deposit, returning it at the original value when the tenancy finishes.

We might even imagine that they expect it to continue to rise in value leading to a nice little profit there.

Or, of course, the bubble might burst…..

10 thoughts on “Property developer speculates”

  1. What’s in it for the tenant to let someone else speculate with a liability to the tenant?

    On an explicit “I keep the profits, you’ll just have to trust me to make good the losses” basis?

  2. I read a couple of weeks ago about plans to launch a blockchain property exchange which will enable you to sell shares in your home in exchange for bitcoins.

    I also read that Bitcoin vs USD has gone from $750 to $4,300 or so this year. This does seem a bit erratic…

  3. @What’s in it for the tenant to let someone else speculate with a liability to the tenant?

    It needs to be backed by one of the (regulated & approved) Deposit Schemes, which guarantees the deposit will be returned to the tenant (the landlord has to pay to register each deposit with the scheme – i.e. insurance premium).

    In any case the same legislation (introduced in 2010, IIRC) also states that “interest” must also be returned to the tenant. I’m not sure what it says about income from speculation, but it could be argued that that is an interest.

    In any case, I think prior legislation stipulates that such monies belong to the tenant and are only held in trust by the landlord (i.e. it was done on an honour system, which was often abused).

  4. We might even imagine that they expect it to continue to rise in value leading to a nice little profit there.

    Or, of course, the bubble might burst

    Really? A publciity gimmick surely, and which appears to have worked…

    My bitcoin is on them instantly exchanging back out (and only exchanging back in if and at the point ever needed for refund).

  5. @Justin, pretty much the same way it is done in Germany, for the same reasons (landlords disappearing with tenants’ money) – I didn’t realise they had made the same change in the UK. Which effectively makes it impossible to hold the deposit in Bitcoin anyway.

    Or, I suppose you could agree a deposit of X Bitcoin, in the same way you could agree a deposit of X Dollars, Euros, or Afghan Kamelturds if both parties so wish. But you then have to return that deposit in the same currency, so no speculative gain for the landlord, or speculative loss for the tenant.

    In other words, what’s the point?

  6. @BiG

    …Which effectively makes it impossible to hold the deposit in Bitcoin anyway…

    A landlord has two choices: Register with a scheme* which holds the tenant’s deposit and return it directly to the tenant on completion of the let, or Register with a scheme where the deposit is held by the landlord who agrees to return the deposit later.

    (Ignoring any disputes, e.g. where deductions can be made for damages).

    A landlord would presumably pick option 2 for Bitcoin. Or maybe combine deposited cash with bitcoin collateral.

    In other words, what’s the point?

    The bitcoin (or cash) is held over time and used for speculating. Maybe their thinking is to pay the tenant at the prevailing interest rate for savings, gamble, then pocket the difference? Banks do this every single night (I forget the term for it – anybody?).

    * scheme is the “Tenancy Deposit Scheme”, and was introduced in 2004, not 2010 as I previously stated.

  7. Oh. Distracted.

    I meant to also say that Spain introduced this in 2012 (2013?), so maybe it’s a Europe-wide requirement.

  8. I also read that Bitcoin vs USD has gone from $750 to $4,300 or so this year. This does seem a bit erratic…

    The overall trend since bitcoin became a thing is that it continually increases in value. While I can speculate about multiple reasons, the one that intrigues me the most is that the increased value comes from the ‘fact’ that people prefer to use private currency over government currency. Other than the obvious, try to ban them, steps, what would governments do if everyone stopped using the government currency in favor of private currencies, valued by the market instead of a central bank?

  9. “Or, I suppose you could agree a deposit of X Bitcoin, in the same way you could agree a deposit of X Dollars, Euros, or Afghan Kamelturds if both parties so wish. But you then have to return that deposit in the same currency, so no speculative gain for the landlord, or speculative loss for the tenant.

    In other words, what’s the point?”

    To pay the deposit with hard-to-trace drug money.

    “Other than the obvious, try to ban them, steps, what would governments do if everyone stopped using the government currency in favor of private currencies, valued by the market instead of a central bank?”

    Accept tax payment in BTC?

  10. @synp

    To pay the deposit with hard-to-trace drug money.

    You can also do this with cash, as I found out following a particularly bad tenant in 2011.

    And, no, I didn’t greedily snatch a fistful and look the other way – I was abroad and the property was being managed by a supposedly respectable letting agency.

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