London, UNITED KINGDOM – In what will probably go down as the most expensive pizzas ever, an early Bitcoin adopter paid 10,000 Bitcoin (BTC), or what is the equivalent of US$100 million at today’s rates for his purchase. In May 2010, Laszlo Hanyecz, a computer programmer from Florida, put out a request on a Bitcoin forum asking if someone would deliver two pizzas to him for 10,000 BTC and an anonymous user took up the offer, putting the order to Papa John’s and taking receipt of the Bitcoin.
We’ve come a long way since then. Although you’re not likely to use Bitcoin to pay for your burger or Litecoin for your latte, the options at the higher end of the market are almost limitless. Bitcoin for your Bentley? Check. Monero for your Monet? Done. Ripple for your Rolex? Consider it done. But at this end of the spectrum, size matters and big is beautiful.
As the value of Bitcoin has soared many early adopters have become stupendously wealthy and are looking for ways to splash some of that digital cash. According to one early Bitcoin miner who spoke on condition of anonymity,
“We made this stuff from our PCs in the early days, we never thought it would ever be worth anything, but we were doing it because it was a fun project.”
Now that that the rest of the world has cottoned on to the value of Bitcoin and its brethren, the luxury market wants to help these new crypto-affluents spend some of their digital cash. Bitcoin had a much darker reputation in the early days, gaining a reputation for being used to purchase illicit goods – drugs, weapons, pornography – on the so-called dark web, with the ability for traders to remain anonymous being an obvious pull. But as discreet as its users were, many criminals soon discovered that cryptocurrencies were not quite in the same level as cash when it came to anonymity. Although technically difficult to trace the control of a Bitcoin address (Bitcoin and other cryptocurrencies are stored in addresses called “wallets”) to any one individual, whenever criminals try to receive cryptocurrencies or sell illegal items, their trail makes it easier for law enforcement officials to track them down than cash.
Which is where the world of luxury comes in. Echoed in the Telegram channels of the cryptosphere are the oft heard refrain, “When moon? When lambo?” – cryptocurrency jargon for asking when an Initial Coin Offering (ICO) token will soar in price and when they can use their earnings to buy a Lamborghini. Because crypto-millionaires and billionaires were being minted at an astonishing rate, early adopters started spending their newfound wealth in the predictable way that many who become instantly rich do – on excess and luxury. US$10,000 bottles of champagne and US$200,000 of cars at the snap of a finger and as the liquidity and widespread acceptance of cryptocurrencies has risen, so have the number of luxury merchants lining up to serve this new demographic.
This is where François Chabanian comes in. From his ritzy Bel-Air Fine Art Gallery in Mayfair, in the heart of London, the seasoned art dealer who founded the gallery in 2004 held an exclusive grand VIP opening to demonstrate a new payment gateway that would allow many of his crypto-affluent clients to purchase fine works of art using cryptocurrencies. Powered by Aditus Pay, a cryptocurrency payment gateway servicing luxury retailers, Chabanian will extend the payment gateway to the rest of his galleries in Switzerland, France and Italy. According to Aditus Pay co-founder and CEO Julian Peh,
“There is a growing pool of crypto-affluents who want to be able to use the gains that they have made through their investments in cryptoassets to purchase the things that they desire. Aditus Pay bridges that gap from cryptocurrency to reality while removing the challenges both from the luxury merchant as well as the crypto-affluent.”
“By providing a platform where crypto-affluents can use cryptocurrencies to pay for the luxuries they desire while allowing merchants to receive payment in the currency of their choice, Aditus Pay is creating an entirely new customer class for purveyors of luxury goods.”
A few doors down from Bel-Air Fine Art Gallery, Eleesa Dadiani now offers crypto brokerage services in addition to running her fine art gallery. Dadiani operates the recently launched Dadiani Syndicate – a platform that enables owners of cryptocurrencies to invest in fine art, rare cars, precious stones and property, effectively turning their digital fortunes into hard assets. Dadiani describes her role as,
“To simply act as a conduit between buyer and dealer.”
By forging relationships with a number of luxury merchants, Dadiani and Chabanian are joining a growing list of purveyors of luxury who use gateways such as Aditus Pay to facilitate sales by converting cryptocurrencies into the goods and services desired by crypto-affluents.
Until recently, that process was anything but straightforward, but with companies like Aditus coming in to fill in the gap, peddlers of luxury can focus on what they do best, selling the most exclusive goods and services to the most exacting clientele. Nothing is off limits – as long as clients have the funds to pay for it. But crypto-fixers like Dadiani are reluctant to take on smaller deals that are worth less than a million dollars,
“Smaller trades? It’s not my interest. I don’t want to choose more than 20 to 25 clients at any given time. With that I’m not going to be running around for a US$350,000 bag. It just takes a lot of leg work.”
That sentiment is echoed by other intermediaries who assist the crypto-rich in fulfilling their real world desires. According to one over-the-counter or “OTC” trader who declined to be named and who helps individuals swap fiat currency into cryptocurrencies and vice versa,
“We don’t do trades of anything less than US$200,000, because the work required for a US$100,000 trade and a US$2,000 trade is the same and frankly, it’s just not worth our time.”
Despite the high watermark, the OTC trader has no shortage of clients, changing on average US$500,000 worth of cryptocurrencies on a quiet day to US$1 million a day when the markets get really volatile. The OTC trader is a bit more discreet when it comes to talking about his clients, claiming to do the necessary know-your-customer (KYC) measures, but declining to speak more about which countries they hail from.
In New York, Elizabeth White, the founder of luxury crypto concierge service the White Company and former LVMH and Formula 1 executive says that she is fielding calls 24 hours a day from clients in South Korea, Canada, China and the United Kingdom, all looking to spend the contents of their digital wallets on every manner of luxury. Her website lists an inventory including a one-of-a-kind Peter Beard artwork, gold bars, superyachts and limited-edition Rolexes, all ready and waiting to be bought with cryptocurrencies.
Whether it’s securing an executive suite at a sold-out sports game or over a hundred MacBooks, White can make it happen. Take the painting by American artist Mark Flood, “Select a Victim,” which became the first piece of contemporary art to be purchased in America using Bitcoin. It sold for 12.3BTC of about US$110,000,
“This was not a public offering to all my clients. I sent the buyer the image, the provenance and a few links on Mark Flood. Immediately he responded that he had to have it.”
The vast majority of crypto-affluents tend to be men, given that they were the first few who experimented with mining cryptocurrencies, chief among which was Bitcoin. Art dealers have been especially intrigued by the possibilities of the blockchain technology underpinning Bitcoin, as the cryptocurrency system works via a series of immutable ledgers that can help provide rock solid provenance for fine art. According to White,
“Some people are purchasing crypto just to get access to the items we sell.”
Which may give some indication that despite Bitcoin coming off its stratospheric levels towards the end of last year, its value has more or less held relatively stable, hovering around the US$9,000 mark for some weeks now, which in the cryptosphere where intraday price swings of 30 percent are possible, is a tome of stability.
Meanwhile Dadiani believes that she and her peers are,
“Demonstrating that cryptocurrency isn’t synonymous with money laundering and arms.”
But that’s not to say that Dadiani’s clients do not prize their privacy. According to a high net worth individual (HNWI), who spoke on condition of anonymity,
“When you’ve passed a certain stage of wealth, it’s no longer in good taste to broadcast how you’re spending your money.”
May HNWIs also appreciate the discrete nature of cryptocurrencies. White and Dadiani both insist that their clients should be treated like any other HNWI and White adds,
“A lot of people don’t want the world to know what they’re spending their money on. You never know what’s inside anyone’s house or garage.”
Dadiani is quick to agree,
“I don’t see it as anonymity, it’s privacy.”
But can the traditionally conservative and slow-moving luxury scene adopt and embrace cryptocurrencies wholeheartedly? According to White,
“Cryptocurrency is pretty sexy, it’s the newest thing. It’s like when dot com started, everyone started making websites. Now everyone’s building coins and tokens. It’s still in the early stages, but the masses are taking to it and they are buying to use. Not to hold.”
While the trend of actually using cryptocurrencies started with pizzas and has now moved on to Picassos, there’s nothing to say that it won’t head back to pizzas again. Right now, the payment and processing speed of cryptocurrencies is at a fraction of those which we’ve grown accustomed to using credit cards. But some of the brightest minds are working on solving that problem. In the meantime and especially when it comes to big ticket items for which speed and volume of transactions are not as crucial, cryptocurrencies seem a decidedly good medium for transactions.