A first of a kind trial to be done in South Africa with Quorum holdings accepting cryptocurrency as rental deposits.
Quorum holdings, which manages rental accommodation in plush Joburg suburbs, is introducing a new way for tenants to pay rental deposits – cryptocurrency.
The trial is currently running in Forest Views apartments in Bramley, east of Johannesburg. Depending on how it works, it will be expanded to other apartments in Johannesburg and Cape Town under Quorum.
The use of cryptocurrencies is growing in South Africa and is accepted by a growing number of businesses as a form of payment. Cryptocurrency is a digital asset based on a network that is distributed across a large number of computers. This decentralised structure allows them to exist outside the control of governments and central authorities.
There are big risks however, as fluctuations in the price cryptocurrency are often huge compared to more typical assets and currencies like the rand. Tenants could gain or lose thousands, even hundreds of thousands of rand worth of cryptocurrency, depending on what the value of cryptocurrency when their rental deposit is returned.
By law, the deposit is meant to sit in an interest-bearing account for the duration of the lease, with the proceeds going to the tenant. It is a rule often flouted by landlords, who use the money until its due back to the renter. Tenants don’t usually benefit from rental deposit.
The new scheme by Quorum offers tenants an alternative route of utilising their cryptocurrency. Tenants who take part in the venture are expected to deposit their cryptocurrency from their Luno accounts into Quorum’s Luno accounts. The deposited cryptocurrency must equate to the rand value of the required rental deposit.
“At the expiry of the lease and provided that the client is in good standing with no arrear rental owing, the tenant will be refunded with the same domination of cryptocurrency originally deposited,” Quorum’s legal counsel, Saul Mayer told Wits Vuvuzela. “If the domination deposited does increase then that will be great for the client and if it decreases, the client will bear all the losses. Quorum will not take any profit at all,” Mayers added.
With cryptocurrency being an investment that comes with high risks such the market value decreasing against the rand, Quorum will shoulder any acquired losses to utilise the original deposited amount by tenants.
Asheer Ram, a lecturer in the School of Accountancy at Wits University with an interest in cryptocurrency, told Wits Vuvuzela that the venture could be beneficial to tenants who do not typically engage with the traditional payment ecosystem, such as banks using a fiat currency. It will allow them greater financial flexibility, Ram said, but he warned that there was security concern around cryptocurrency.
“Any dealings in cryptocurrency should be done carefully. In terms of sending cryptocurrency, one needs to ensure that the receiving address is the correct address. Further, the security of one’s account where cryptocurrency is held must be considered and two-factor authentication and other security measures implemented,” Ram told Wits Vuvuzela.
He added, “there’s risk that no charge backs (a charge that is returned to a payment card after a customer successfully disputes an item on their account statement or transactions report) can be made with cryptocurrency. Unlike traditional payments system, any transfer of cryptocurrency would be irreversible.”
FEATURE IMAGE: Forest View apartments in Bramley, Johannesburg. Photo: Provided
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