The rise of bitcoin has baffled big banks since it burst onto the scene almost a decade ago. As owners and brokers start to put their trust in the fledgling currency, Holly Overton investigates the uncharted crypto waters ahead.
The first real-world bitcoin transaction recorded was made by Floridian computer programmer Laszlo Hanyecz when he purchased two pizzas for 10,000BTC ($30). The story is carved into crypto folklore, not because the landmark purchase was as trivial as a pepperoni pizza, but because today those two pizzas would've cost around $578 million. The crossover of bitcoin into the physical world unlocked the true potential of digital currencies and caused a global frenzy buoyed by investor optimism and big-name backers vying for a piece of the action.
Even brokers are eyeing up the opportunity to cash in. “They are buying and selling houses and supercars with bitcoin, so why not yachts,” says Juan Andrade of SuperYachtsMonaco. But with crypto's somewhat cloudy reputation, not everyone has been so quick to jump.
While cryptocurrency remains a niche portion of the market it is not unheard of in brokerage circles. Denison Yachting was one of the first brokers to embrace the controversial coin - and with success too. The US broker has completed six transactions in bitcoin to date across its brokerage and charter portfolios, with another two under contract.
“Buying with cryptocurrency has its advantages,” says founder and president Bob Denison, citing privacy, flexibility, and speed. Bitcoin allows coin holders to make secure payments from user to user through a digital wallet without the need for intermediaries; there’s no central bank or single administrator and the transactions are kept anonymous which is all part of the appeal. “It also allows buyers to send money any day at any time of the day, so there are no physical restrictions, like a bank not being open,” he adds.
On paper, the peer-to-peer system works when the buyer and seller are both willing to exchange bitcoin, but in practice this isn’t always the case. “Most yacht owners today aren’t interested in receiving bitcoin direct,” explains Denison. In most circumstances, buyers have the option of using crypto exchanges such as Kraken or Coinbase to convert their digital coin into dollars or euros to complete the purchase. Although, Denison Yachting is one of the few brokers that accepts bitcoin directly. "If a brokerage client wants USD or EUR we use a service to convert [the cryptocurrency] and charge a 1% transaction fee."
The US broker also accepts bitcoin as direct payment for its in-stock inventory of new builds. “We’re always trying to find ways to make the yacht-buying process safe and easy for clients. Accepting bitcoin is just one of those ways," says Denison.
Andrade shares the same view. “It’s just another tool to find a buyer for your boat,” he says. In February, SuperYachtsMonaco announced that the owner of the 50-metre JoyMe was now accepting bitcoin for his €9.9 million superyacht. According to the broker, the yacht had been on the market for a year and a half, and while there was plenty of interest, there had been no bite. “The owner is not super young, but he's forward thinking and open minded,” says Jim Evans, managing director of SuperYachtsMonaco.
As with all investments, though, bitcoin is not immune to fluctuations. While it's currently enjoying a surge in value, historically the currency has been prone to lulls, which might explain the slow uptake in the brokerage sector. “If you have something today that’s worth, say €10 million, this afternoon it could be worth €15 million, and tomorrow morning it's worth just €5 million,” explains Andrade.
However, there is another barrier to bitcoin in yachting that is much more superficial: “We’re just not asked", says Toby McClaurin, sales director of Ocean Independence. “We get crazy ideas where a buyer wants to exchange a villa or property more often than we would get a request for cryptocurrency,” he says. But that doesn't mean he'd rule it out altogether.
“Our job as brokers is to make buying, selling and chartering yachts as easy as possible," he says. “Anything that encourages more people into the market is a good thing and if there was demand out there I'm sure we would find a way to support it". It was for the same reason in 2017 that Royal Yacht International announced they would be accepting gold as payment for yachts along with bitcoin too.
McClaurin continues: “As an industry, we're very flexible. There's always a solution there whether it's dollars, euros, pounds, or pretty much any other currency."
Elsewhere, Rupert Nelson, director of Burgess commented: "I think many owners, for now, will be too nervous about accepting crypto unless there are significant safeguards in place. Perhaps once the novelty factor wears off and the volatility calms down, then why shouldn’t it be a currency in yachting." Meanwhile, Raphael Sauleau, chief executive of Fraser, commented that while the brokerage was currently in a position to accept bitcoin, it would "keep an eye on developments".
There's no doubt bitcoin has gained some serious traction in the last year alone, with thousands of copycat "altcoins" such as Ethereum and Dogecoin joining the crusade. Some experts argue that the momentum of people piling onto to bitcoin bandwagon is merely a case of FOMO (fear of missing out), while others share the view that crypto could one day replace shiny bullion bars as a safe haven in investment portfolios.
According to data collated by The Block, trading on major crypto exchanges soared to $1.7tn last month, from $1.2tn in March and less than $100bn in April 2020, despite warnings against the currency by financial watchdogs. The UK Financial Conduct Authority (FCA), labels cryptocurrencies as "very high risk, speculative investments" and warns, "consumers who invest in these types of product should be prepared to lose all their money."
Still, some companies remain undeterred, including three of the world's largest payment companies, Mastercard, Paypal, and Visa, that have begun dealing in crypto. Elsewhere, luxury watchmaker Hublot designed a limited-edition watch payable only by bitcoin, Tesla is set to start offering its cars for sale in crypto, and you can even bag a seat on Sir Richard Branson’s Virgin Galactic Flight. And while there are plenty of financiers who don't believe crypto has any sort of staying power, for many, it is just another way to do business.