AN entrepreneur has paid for a $1million Dubai villa with Bitcoins after he met one of India’s biggest cryptocurrency miners.
Vineet Budki, 40, ran a travel company until 2017 when he was introduced to the world of crypto by one of his clients.
Budki was so successful at mining that he has now paid for a luxury villa using the virtual currency.
The move is highly unusual because traditional mortgage lenders are wary about where the money has come from and who it belongs to
Gian Maria Volpicelli, a senior editor at Wired and the author of Cryptocurrency: How Digital Money Could Transform Finance said: “Bitcoin initially became popular on the dark web, where people used it to buy drugs on marketplaces such as Silk Road.
“But over time it caught on as a legitimate form of investment and was recently adopted by El Salvador as legal tender.”
The original idea behind cryptocurrencies, according to Volpicelli, was to “a form of global digital cash, units of value that can be handed out from one person to another like coins, but online”.
Initially, Budki started buying Ethereum which at the time was worth around $40 a coin but the price quickly shot up.
Ethereum is now the second most popular cryptocurrency, worth around $2,000 a coin making Budki a tidy profit of hundreds of thousands of dollars.
‘I BECAME A BELIEVER’
He also began mining Bitcoin.
“I invested in a few projects that went ballistic,” Budki told The Times. “It was right time, right place, right market. I became a believer.”
He then made crypto-mining his full-time job working off his laptop PC although the field has become much more specialised since then.
Mining can nowadays be costly as it requires a lot of computing power and electricity as well as specialised computers and a warehouse to store them in.
Budki now owns more than $1million worth of those computers which he keeps in Russia and claims they make him around $100,000 a month.
Earlier this year Bitcoin’s price hit $58,000 a coin, the threshold Budki set himself to cash in on some of the profits.
He decided to invest in a house in Dubai, where he has been living for the past 18 years.
“For me it was a diversification of assets strategy,” he said. “I had a feeling that there was going to be a fall. I sold some of my bitcoins and today I can buy two bitcoins for the same price.”
Budki had three options open to him when buying the villa using his crypto-profits.
The first was to go to a developer that accepted Bitcoin as payment with many companies in Dubai now offering this service, especially for new-build properties.
The second was to use a bank. Some banks like Citibank give the option to transfer money into a traditional account via a cryptocurrency exchange.
Binance, based in the Cayman Islands, is the world’s largest exchange in terms of trading volume but was banned from operating in the UK by the Financial Conduct Authority last month over anti money laundering concerns.
“They convert bitcoins into dollars for a fee, then transfer them to a bank account,” Budki said.
Last year he used this method to pay off a mortgage on his first house in India.
The third method is via an “over the counter” (OTC) transaction using a broker.
Budki said: “OTC is a bit more expensive. Brokers can charge between 1.5 and 3.5 per cent on the transaction.”
He chose this option though because the broker also offered him a number of properties to view.
Budki eventually chose a three-bedroom villa with a $1m price tag in the Arabian Ranches, a gated community close to Dubai’s Global Village.
He said the whole process took around 20 days with the actual sale taking less than 24 hours and is planning to move in with his wife next week.
Budki claims the agency did some form of due diligence but he admitted he wasn’t sure if anyone can track the origins of the funds.
That problem, say Bitcoin critics, make it the currency of choice for gangsters and money launderers.
Budki recommended only using the OTC option with a regulated and registered broker as otherwise people could lose their entire investment.
He said: “Once you transfer the money, anything can go wrong. Maybe they charge a bit higher, but what’s 1 per cent against losing all your money?”
After buying his Dubai property he is now looking for a holiday home in Malaga, Spain.
Investing in cryptocurrencies can be a rollercoaster ride, with huge rises as well as dramatic plummets in price.
“I’m a believer,” Budki said. “But financial investment, even in crypto, is all about discipline. You can’t put all your eggs in one basket.”