Russia’s Capital Flight To The West: Showbiz Millionaires Seek To Buy Real Estate With Crypto
What do Russia and cryptocurrencies have in common? Both are being scrutinized very closely by the international business, both are mostly misunderstood and feared by many, yet both present some terrific entrepreneurial opportunities in the long run once appraised and regulated.
In the meantime, as the flight of fiat capital from Russia continues, the moneyed Russian showbiz stars are figuring out the means to secure, preserve and multiply their at times ill-gotten but vast fortunes while physically remaining in the country. Many think crypto is the way.
As Sheldon Cooper would put it, it is an accepted convention by statisticians that over the past 13 years about 20 thousand dollar millionaires and billionaires have left Russia. 6,000 in the last three years, according to the research by Knight Frank, one of the leading international consulting companies specializing in serving the super-rich of the world.
Among the reasons is state interference in business and inconsistency of local legislation. In recent years the anti-Western sentiments of the authorities and the so-called Deoffshorization Act have been dubbed “the last straw” by the Russian “job creators.”
The whales of showbiz in Russia were and still are among those who desperately try to remain in the “live and let live” relationship with the Russian state apparatus. Most of the agreements between glitz and glamour dealers in Russia are still “bathhouse-based” just the way it was in the 90s: a tour contract, a film studio agreement or a modeling gig is only signed when suitcases of cash change hands at a plush establishment with lots of witnesses and bodyguards. However, what to do with those suitcases after the hand-slap and a “na zdorovije!” toast is still debatable.
The Russians’ financial activity abroad has been felt for a long time. One of the latest examples is that for four months of 2017 the number of feelers for the purchase of real estate in London increased by 30% (compared to the same period last year), Knight Frank reported in May. It’s the Russians, of course! Predominantly (in 60% of cases), Russian citizens are looking for an apartment for themselves, their families or children. The budget is £1.5-5 million but recently more and more inquiries are made as to whether or not a seller will accept crypto.
The Zeitgeist? Perhaps, but there may be more trivial forces at play here. The crypto market is exploding with possibilities lately, but the consensus is that it’s about to get whittled down to a few well hedged trusted entities constituting the future world supply of the crypto currency. In the meantime, a hefty digital purse full of well-managed tokens is a modern means of portfolio diversification and value storage.
Besides, the sagacious Russians like no other business people in the world know the meaning of “asset restrictions” or “capital control.” Twenty-five years ago virtually every one of those enterprising devils, who in time became filthy rich, was most of all concerned with precisely those issues: not catching a racketeer’s bullet was a top business priority. Expanding their asset base and capitalizing on it with as few restrictions as possible was key. But the deviousness of the communist state in deterring its citizens from such “rotten Western practices as doing business” was so integral and, frankly, scary, that every today’s 50-year old millionaire in Russia looks over both shoulders before making a move. Therefore, the Russian business’ answer to political instability (in many cases, that is to say, “persecution”) and less than fair treatment by the state was always “innovative practices” (that is to say “creative accounting”). As you can probably tell by now, cryptocurrency use is hands down the most innovative practice of them all.
Buying real estate with crypto is no longer an exotic feat, says a West End realtor to the Russian stars who asked to remain anonymous. In general, the Russian pop stars whose names will tell the Western public nothing, but will make any Russian female shriek in exaltation, are interested in elite small apartment houses or condos located near parks and green areas. Here they can walk among the indifferent to their fame Londoners freely, unrecognized and rid of unwanted attention they invariably warrant at home.
Another 30% of inquiries are related to investments in residential and commercial real estate. As a rule, Russian stars are looking for apartments, retail space in the central streets and a ready business. The reason being is that royalties law, copyright infringement legislation and all the other legalities of show business in Russia have never worked as an enforceable law, and are virtually non-existent still. In other words, authoring a smash-hit today by no means equals to your grandchildren’s financial well-being tomorrow. That, which in Hollywood is a mere backup plan, for a Russian pop-idol may mean physical survival and a steady pension.
In these conditions, the newest digital money protected by encryption for transactional anonymity and the highest level of security is a great catch, especially in such a universally coveted asset class as real estate. As is so often the case, for better or worse, technology is outpacing the regulators and whatever happens with crypto in the future, you’ll still have your title deed.
