You are currently viewing our desktop site, do you want to download our app instead?
Moneyweb Android App Moneyweb iOS App Moneyweb Mobile Web App

Crypto pioneer buys a R600k house with crypto and it ends up costing R200k

Using a smart contract, with no ID, email or customer information required.
AltCoinTrader founder Richard de Sousa purchased the property ‘completely outside of the banking system’. Image: Supplied

Richard de Sousa founded crypto exchange AltCoinTrader in 2015 and has been a pioneer in bringing crypto to the broader South African market.

He lives, eats and breathes crypto. He decided to start exiting the traditional financial system several years ago – going off the grid, if you will, though says he still has several trusts and bank accounts.

He started buying bitcoin when it was $6 (around R91); today it is close to $20 000 (R303 805).

When bitcoin reached R10 000, he figured it was a good time to convert some of his gains to property.

He purchased a R4.3 million property for 420 bitcoin, which at today’s valuations is close to R128 million. He sold more than 90% of his bitcoin – something he regrets to this day.

“We all made mistakes when it came to crypto. When bitcoin hit R10 000 I thought I had done well out of it and I wasn’t sure where it would go next, so I decided to pour some of my profits into property. In retrospect it was a mistake, but I’m okay with it.”

A story to shake the banks

De Sousa has another story to tell that should have the banks very worried indeed.

He recently spotted another property for sale on the West Rand with an asking price of R650 000.

He jumped onto the Oasis.app website, which offers crypto-based financial services, including loans.

He decided to borrow the money for this house using his Ethereum crypto coins as collateral.

He then applied for a loan from Oasis, without having to go through the Know Your Customer (KYC) routine, nor did he have to provide an ID or an email address.

Here’s where it gets interesting: there are no monthly repayments.

In fact, you can choose to defer any payments for 20 years, or 40 years, if you so wish. When De Sousa took out the loan, the interest was 0%. Today it is 2%.

This is a mortgage lending model that could smash the banks’ hold on this market over the next few years.

He goes over the loan process in this Youtube video:

De Sousa’s loan was based on a smart contract, which is a type of contract linked to the blockchain, where certain conditions must be fulfilled before the collateral is called in. In this case, he had to provide roughly R1 million Ethereum as collateral to cover a loan valued at R650 000 to buy the property.

Should the Ethereum price drop below R650 000, the “smart contract” would automatically liquidate his Ethereum, deduct a 13% liquidation fee (or penalty) plus the loan amount, and refund him the balance.

Read: The future of money and payments

It took Da Sousa less than 10 minutes to apply for the loan and place his collateral in the form of Ethereum coins into a vault at Oasis. He retained custody of the coins for the duration of the loan. Only the smart contract had the right to call on his collateral, and only under the conditions outlined earlier.

He wrote to the home seller’s attorneys and told them he would make full payment in cash into their trust account within seven days. “I gave myself seven days to do this, but in reality I only needed a couple of days.”

The loan for R650 000 was made in a crypto currency called Dai, which is backed 1:1 by the US dollar. He moved the Dai to the AltCoinTrader platform, sold it for rands (and made an extra 4-5% on this leg of the transaction because US dollar-linked cryptos typically sell for a higher price in SA due to local exchange controls, making it more expensive to acquire hard currencies).

With the Dai now converted into rands, Da Sousa transferred R650 000 to the house seller’s attorneys, and the deal was concluded.

The seller had no idea of the novel funding structure that took place in the background.

At this point, De Sousa was under no obligation to make monthly instalments on the loan.

He could ignore this for the next 20 years, or longer – the only risk he faced was that Ethereum’s price would drop below 66% of his collateral requirement, at which point his crypto would be liquidated under the terms of the smart contract.

One way to avoid your collateral being compromised in this way is to top it up with more Ethereum should there be a severe price drop.

Read: Six bitcoin will buy you a R1.4m house

De Sousa was under no obligations to make any monthly repayments on the loan, so he left it for several months. Seven months later, the Ethereum price had gone up three times, so he was now sitting with R3 million in collateral instead of the original R1 million.

At this point he decided to settle the loan in full. In effect, he paid about one third (or R200 000) of the house’s asking price by simply waiting for his Ethereum to increase in value. The house is now tenanted and earns a monthly income.

“I did all of this completely outside of the banking system, which is fraught with risks,” he says.

“You miss two payment under a mortgage contract and the banks have their lawyers all over you. This way I avoided the banks altogether, and that makes me extremely happy.”

It’s the ability to take out loans like this that should encourage mass adoption of cryptos. Smart contracts are backed by cryptos such as bitcoin and Ethereum. Rands and US dollars (unless in the form of Dai or any other so-called ‘stable coin’ backed by actual fiat currencies) won’t get you far in this world.

You have to exit the matrix and enter the crypto universe. Then all sorts of possibilities appear, says De Sousa.

Read: Moneyweb Crypto glossary

AUTHOR PROFILE

COMMENTS   40

Sort by:
  • Oldest first
  • Newest first
  • Top voted

You must be signed in to comment.

SIGN IN SIGN UP

Still trying to figure out what’s in it for the loan provider to even provide the loan…

Interest.

negligible interest? must have a massive cash reserve.

But there were no monthly payments, so where is the interest coming in?

@supersunbird from his collateral.
Say he deposited 100 ETH which was priced at say $300/ETH at the time; $30000 in value.

He borrowed DAI which is roughly = to $1 (a stablecoin) so he borrows $18000 at say 60% LTV which incurs interest of $1800pa capitalised.

After a year then he owes $19800 but the price of ETH is now $600/ETH, so his collateral is now worth $60000.

Should the price of ETH drop, the smart contract will automatically liquidate his ETH when the value of his collateral drops below capital + interest at any point in time, unless he tops up his collateral with more ETH.

“ When De Sousa took out the loan, the interest was 0%”

Liquidity providers charge stability or exchange fees in lieu of interest…

A 100% risk free loan on his books……

This article smacks a little like an advertising campaign! Beginning with finding a property for only R600k worth buying…….

I would find it very hard to find a place that I would want to live in for R 650 000.

He is a property investor; he doesn’t want to stay in it; he wants a middle class tenant to stay in it & pay rent.

Yip agree
This is a form of native advertising.

feels like a news article
posted at the top of the site etc etc .

1. The logic these people use to work out how the house cost a third because the ethereum went up 300% means he should try for a R120m capital gains loss on the house he bought with cashed bitcoin that subsequently went up that much. Come on, the worst SARS can do is say No.

2. There is no way on earth the property transaction did not necessitate his personal information. Property deeds office does not work that way.

3. Oasis effectively lent him R650k with R1m liquid asset security without doing KYC? They must be breaching laws that are designed to protect society from (1) money launderers (2) unscrupulous lenders. Oasis would assumedly do the same deal if I took them used Rolex collectible watches, gold coins, a suitcase of dollars?

@Johan….eish, you must be a statist, evident in your belief that the multitude of increasing laws strangling the economy and simultaneously infringing the man in the street are ‘designed to protect society’….how embarrassing.

The reality is I remember how easy it was to buy/sell properties, do business back in the 80’s when there was no FICA/RICA piles of papers and forms to be filled, tax was lower etc etc and guess what – the economy BOOMED !

Now, the only thing booming is the red tape and regulations.

Wow, do you REALLY think all these regulations “help protect society” – all the while criminals and politically connected can siphon BILLIONS out the country with no repercussions ???

Eish.

Short answer : the likes of the Zuptas, darkweb, smugglers, bribers and bribed, tax evaders all agree with anonymous banking.

The 80s when the maximum marginal rate of 50% applied to income over R28000 for five of those years? With a loan levy of 5% in one of them? Those 80s?

@Johan_Buys I agree with you every point. So in theory if Mr D pays the purchase price in crypto and the devalues after he makes the payment to the attorneys but before the seller receives the crypto from the attorneys, what happens then? Does the deeds office accept crypto as payment to register the property in your name? If so, which crypto would they make the defacto crypto? Lastly, if the crypto is changed to Rands at any point during the process, how would banks not be involved in the process?

I think most of this flew right over yr head…… This guy isn’t talking about the property transaction being ID – less…. He’s talking about the effort of raising and borrowing the capital…. No nanny state involved in yr deal. The way it should be.

No matter how much you want to hang on to the past, the reality is, the current financial system is geared towards the connected and wealthy.

However, Bitcoin is the great equalizer – it gives the man in the street total control over his money and by and large removes the need for the perverted banking system and the parasitic middle man.

In addition, unlike most of the mainstream financial institutions, the block chain cannot lie, steal or be compromised.

Best you do some proper research first – otherwise, you’ll get get caught with your pants down just like in 1996 when you called the internet a ‘tech fad’

John u mention that this thing will favour only, drug lords, tax dodgers, thieves, scam artists and the underground black market ect……. As a honest hard working person that is sick and tired of big government continously finding new ways to steal my money thru new taxes… Sick of them blatantly misusing that capital for thier own thieving use…. Sick of being silently robbed by them continuesly inflating the money supply….. Then inventing more rules to stop me from moving my capital to safety away from thier dirty hands…… If I try protect my assets they have even made laws to put me in jail……. Yet none of them end up in jail…… Almost like these laws are written for them eh???…………… Well it’s a crazy world isn’t it when u find yrself as an honest hard working person… To be lumped with the drug lords and mafias of the world.

The better way to do it eg a 3 million property: offer 5k , balance in btc , transferred from wllet to wallet , no intermediaries.Because of “various reasons” you should be able to negotiate a nice discount esp if the seller fancies moving funds somwhere else….eg buy a property in Mauritius, same process for him. Beware of sharp operators in this space, a smart contract per definition should involve no intermediaries, nothing to sign physically , no “trusted third parties” Currently still evolving , still need an attorney somewhere in process. But banksters involvement can easily be shrunk

Life does not work like that. You try to move any significant value or convert crypto to a real thing like a house, the authorities and banks WILL require source of funds declarations with notarised/certified supporting documents. FATCA regulations will immediately open up your name, date of birth, passport and national id and tax details to (almost) every country’s tax authorities. Any bank that wishes to transact with other banks in dollars or euros or have its card facilities or banking licenses in the US or EU (and others) is compelled to comply with FATCA. That also applies to securities brokerages whether online or old school.

No client is worth that bank losing its banking licenses or ability to transact.

Crooks still get away with laundering because of corrupt bankers, lawyers and accountants. If 1:1 currency equivalent crypto could operate seamlessly and reliably with FATCA compliance it would be wonderful for the cost of transacting. But currently crypto’s appeal seems to be the anonymous angle plus the volatility appeals to traders and speculators.

Nice to see a ”real life” example.

He could’ve had the same luck at an online casino:)

So if a tech-savvy criminal holds a gun to his head. Will he be able to ‘ask’ him to transfer his crypto to the criminal’s account that was also opened in only a few minutes without using any form of ID?

SA banks accept crypto payments for houses? Who knew.

So many cryptocurrency good news stories being published on Moneyweb.

Could we balance it with some of the many real stories of losses?

@TheSpark I have not seen many stories on Moneyweb regarding people’s wallets getting hacked, or being duped into paying the incorrect provider with their crypto, or being locked out of their wallet cause they lost their key, or how it facilitates money laundering for criminals. It’s all blue skies apparently.

“It is only when the tide goes out that we see who is swimming naked” – Warren Buffet.

“The risks that do the most damage are those risks that we do not anticipate or identify, and therefore, fail to manage. The biggest risk lurks in the “risk-free” environment. The Nobel Price laureates who managed Long Term Capital Management promised risk-free investments to their clients until their geared positions threatened the entire US financial system”. – Sensei

No ID required – – – – – nuff said – – – – BS Scam

Crypto and Bitcoin “influencers” very nervous – – – – – – – see the many BS stories in recent days

Nice. If only the property could be transferred without deeds office then we can finally create a market free of government. Imagine the chaos when gov realises they aren’t needed anymore!

As an aside, whats the benefit of getting a loan if your 2x collateralized already? Cant you rather just settle the loan, or is the reason because you want to keep the crypto for a while and see what happens to it?

Yes to keeping crypto, in this case ETH. He borrowed Dai which is essentially USD, and reckoned the ETH price would outstrip Dai/USD…which it did during the property transfer process, ultimately reducing his property purchase price from R650k to R200k per the article.

The real test of crypto will be regulation – It’s the “currency” of choice for very dodgy individuals that want to fly below the radar – Once we can trace the buyers and sellers and the original funders its going to get very interesting… Banks, governments (tax authorities) etc all want a piece of this pie…

@Gemini….nope, this ‘dodgy’ campaign thrust by mainstream is the agenda to tarnish crypto.

Yes, like any free market there are bad apples – just like the current financial system which seems to now in fact be a majority of bad apples.

What a joke – fiat and the current sick financial system as we know it has been the biggest weapon of the banks against mankind for a hundred years now – yet the uneducated complain about a handful of spotty teenagers using crypto to buy naughty material on the ‘oh so dodgy dark net’….gosh…….how scary !

However, the reality is crypto threatens the banksters, who control the media and are on a global assault campaign to blacklist crypto with the full might they wield [ or, realizing it’s power, trying to subvert it to their system ]

In this CNN controlled world, all is not as it seems piglets !

Gotta just smile at the Crypto Haters that have buggerall understanding of Crypto (or the property market for that matter) ready to lend their “expert” opinions.

The comments here dont understand the mechanics, please get a basic understanding of BTC first.

For the finance clued-up, the bigger story here is the disintermedation of interest rates globally. Through borderless finance, which crypto is playing a major part, savvy lenders are able to accept your BTC, hedge out the BTC risk with regulated derivatives, borrow at near record low interest rates and lend to you. They make the diff. They can collateralize the loans, as above, and bring credit risk down significantly.

There are major VC, hedge funds and even Asian VC bank funds with tons of capital to deploy getting involved in this “DeFi” space, some are making MEGA bank, Iv seen it personally. And they moving into Africa. I told you buy BTC 1 year ago and dump gold. #Alphaleak

Nothing magical about crypto – Agree its a hedge like Gold but it thrives on hype, misinformation and FOMO – People buy into the hype not the facts… Can’t last forever

Easy-Equities has stocks called EC10 that deals in bitcoin. You buy in Rands and when you sell you get your money back in Rands. All above board as you pay tax when you sell. It does quite well at the moment. I love Easy-Equities.

Interesting. The title says 600k. The article 650k. What!? The article could explain things better.

Dai is a USD stablecoin, so the loan was in USD. The ETH was used as collateral and the smart contract was on ETH. How does ETH and Dai come together?

The property still cost 650k. A cash transaction was concluded.

It sounds like he just got lucky with the ETH market moving in his favour and was able to pay his crypto (Dai) loan off before accruing interest. Someone mentioned gambling at a casino in the comments.

He took a gamble on the ETH price and risked losing 1 million if the ETH price went the other direction.
In an attempt to stop the smart contract from executing he could have ended up pouring more money into this.

Still only for the rich if you need 1m collateral for a 650k loan.

Had he converted his ETH to ZAR and purchased the property cash, there would be no interest or risk and also keeping bank loans out of the transaction.

“When De Sousa took out the loan, the interest was 0%. Today it is 2%.” no mention of why this went up or how high it could go.

That’s awesome, i hope one day i can live from cryptocurrency profits, i’ve just started on https://www.mintme.com and so far it’s been quite good. Do you have any advice for growing faster?

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
INSIDER SUBSCRIPTIONS APP VIDEOS RADIO / LISTEN LIVE SHOP OFFERS WEBINARS NEWSLETTERS TRENDING PORTFOLIO TOOL CPD HUB

Follow us:

Search Articles: Advanced Search
Click a Company: