Dubai or bust for Baroness Bitcoin

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The Times (plus a number of other publications) report on Wednesday that Baroness Mone, the model turned lingerie entrepreneur turned Cameron peer, will be launching a “£250m luxury property development in Dubai that will sell apartments in bitcoin, the digital currency”.

What’s unique about the story is the bitcoin aspect, naturally. High-end property sales occur everyday. High-end property sales for bitcoin, not so much. Or so the narrative goes.

The venture is further endorsed by Douglas Barrowman, Lady Mone’s partner, who tells the Times he has “watched bitcoin grow and been actively involved in it over the last couple of years” and that “the currency is here to stay.”

All a fantastic endorsement for the currency of the future you would think. But is it? Is it really?

To get to the bottom of what’s going on it’s best to move over to the coverage by Coindesk. Here we discover the following:

As might be expected, the flats aren’t cheap, costing between $133,000 and $379,000. The venture is accepting payments in bitcoin, with BitPay serving as payment processor.

These property purchases can now happen in minutes from anywhere in the world with the speed of sending an email,” Stephen Pair, BitPay’s CEO, said in an email.

The above tells you everything you need to know.

For one thing there is BitPay CEO Stephen Pair’s insinuation that payment processing challenges are the key thing that stand in the way of speedy property completions, not legal contracts, searches, onward selling/buying chains or cash financing constraints. Cute.

Then there is the BitPay dimension itself.

As readers probably remember from the first flush of bitcoinmania during the 2013-2015 era, stories of merchants enthusiastically “accepting” bitcoin were a dime a dozen during the period.

The fad nevertheless collapsed for two reasons.

First, it became brazenly clear merchants weren’t really accepting bitcoin as much as employing the services of “payment processors” like BitPay. The latter were the ones taking all the liquidity and exchange risk in these transactions not the merchants. Merchants, to the contrary, were still receiving good old fashioned currencies like dollars, pounds or euros, same as they ever were.

The bitcoin “adoption” narrative was soon exposed as a ruse; employed solely for cheap publicity reasons in the hope bitcoin-themed column inches would drive new business for merchants or help promote their brands to new audiences.

After a while, stories of yet another merchant not really accepting bitcoin began to get tiresome. And after a while still, merchants dropping BitPay because of disappointing sales became the far more common tale — not that this got a fraction of the same publicity.

Second, by about 2016, the cost advantage BitPay had over traditional operators by offering “free and unlimited payment processing for merchants” was no longer tenable due to spiking bitcoin processing costs. BitPay now charges a 1 per cent processing fee on every transaction and “higher fees for high-risk industries”.

Whether the core processing business is profitable on that basis is still unclear. FT Alphaville sources say the company operates a not-insignificant OTC trading operation, implying exchange risk and liquidity is managed in-house. If that’s the case, BitPay may or may not be benefiting (or drawing risk) from speculation for the purpose of propping up the profitability of the core business.

As for what constitutes “higher risk industries” one must assume these represent industries prone to large-scale single transactions, which pose a far greater liquidity threat to BitPay’s model than small transactions. It’s doubtful, after all, the risk could relate to KYC or AML irregularities, since offering to process these for a higher fee would be, err, openly corrupt. Then again, this is bitcoin. Who knows.

Either way, large scale luxury property transactions in tax havens like Dubai would likely qualify as “higher risk”, so we wouldn’t be surprised if higher-than-usual fees apply to the Mone business case.

Not that we can be sure, because we never got a chance to ask the Baroness directly.

To wit, it’s worth pointing out the backstory here.

On August 23, we received a call from one of Baroness Mone’s press representatives offering us the Dubai story on embargoed terms. If we were game, the PR let on, Lady Mone would be available for interviews at the Dorchester on x date (along, we presume, with all the other media).

Strangely, the PR did not seem too familiar with our pre-existing bitcoin or ICO coverage.

Upon pointing out the baroness would do well to familiarise herself with our ICOmedy series before meeting us, we were assured not to worry. Lady Mone would be more than happy to defend her business venture and stand up to tough questions.

And yet, when we tried to anchor down the terms of the interview (for example, we wanted to do it on video), Lady Mone suddenly became “unavailable”.

Go figure.

Related links:
What is crypto’s agenda really? – FT Alphaville

  1. Blockchain goes extra-terrestrial 
  2. The Woz and the crypto wonga
  3. The crypto Buffett lunch has been postponed. Lucky Warren Buffett.
  4. A $100m ICO being sued by the SEC wants more of your money
  5. A crypto Buffett lunch is on the cards. Poor Warren Buffett.
  6. LGC-Coin fights back against the Financial Times
  7. Introducing the “exit coin” for the luxury sector
  8. A failed ICO is trying to flog itself on eBay
  9. Crypto-shills
  10. Parliament gets it, crypto-currency bunkum edition
  11. The ICO whose team members are literally cartoon characters
  12. The London School of Cryptonomics
  13. Intel's disruption, and the problem with every token pitch
  14. Buy SEC tokens! Now!
  15. Crypto “hedge fund” update
  16. The CryptoMillionsLotto
  17. We ran away with your bitcoins!! LOL, JK
  18. About that Petro
  19. Michelle Mone brings a touch of the avant-garde to finance
  20. Conservative peer stakes her name on a crypto offering, just as the market crashes
  21. Crypto market put on notice — yet again
  22. ICO regulator anger translator
  23. Kodak makes last desperate bid for relevance with cryptocurrency
  24. Crypto cards just suffered a major setback
  25. Bank analyst very proud of his cryptocurrency mining rig
  26. Crypto startup wants to revive the non-dollar petrocurrency idea
  27. Crypto bust alert [siren]
  28. What ICO valuations tell us about the state of modern monopolies
  29. The Hitchhiker’s Guide To Cryptocurrencies
  30. This is nuts. When’s the crypto crash?
  31. Do crypto enthusiasts fear credit?
  32. What is tokenisation really?
  33. Trouble in ICO paradise
  34. An update on Harry Redknapp’s favourite cryptocurrency
  35. Congratulations on your sudden interest in cryptocurrencies, Harry Redknapp
  36. Crypto-Apple dealer attempts to avoid US regulators — updated
  37. Lol a FoHFs ICO, srsly
  38. The FCA’s belated views on the ICOmedy
  39. The hot new thing in initial coin offerings is…
  40. Westworld, cryptocurrency, and the gamification of women
  41. Don’t be fooled, the authorities are coming after ICOs
  42. Paris Hilton backs an eyebrow-raising crypto project
  43. So this is what watching a bubble feels like…
  44. Crypto-bailouts for struggling startups
  45. When crypto portfolios go mainstream
  46. What is crypto’s agenda really?
  47. Of crypto-Apples and other fantastical fruit…
  48. Evolution
  49. The best Risk Factors are Crypto Risk Factors
  50. From max to minimum optionality with Dentacoin
  51. Cryptocurrency exchanges could be subject to SEC regulation, too
  52. Three reasons we believe Alphachain is exempt from SEC regulation
  53. In ICO utopia, there is no division of labour
  54. Introducing Alphachain, the Alphaville initial coin offering
  55. Meet Daniel Harrison, the man behind magic money machine Monkey Capital…
  56. ICOs now take Visa (plus other ingenious solicitation temptations!)
  57. ICOs and the money markets
  58. In the crypto world, you can get something for nothing
  59. From dot.comedy to ICOmedy…
  60. What does a crypto startup do with $230m?
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