Ask John Hairabedian why HGregoire began accepting cryptocurrency and he’ll tell this story:
A 19-year-old showed up at the Quebec-based auto group’s used-luxury-vehicle store in Pompano Beach, Fla., to buy a US $135,000 BMW i8. The young man paid with bitcoin, which he bought for next to nothing several years ago. The car cost him 2.7 bitcoin.
Demand to use cryptocurrency has grown steadily, said Hairabedian, 29, president of the group founded by his father, Greg.
HGregoire formally announced the move in March, although it had been road-testing cryptocurrency transactions before that, so far only bitcoin.
Headquartered in the Montreal suburb of Saint-Eustache, HGregoire has 30 stores in Quebec and Florida, and one in California.
Its new- and used-vehicle sales in Canada and the United States last year totaled about 70,000, which likely ranks it as one of the largest dealership groups to adopt cryptocurrency, said Hairabedian.
Cryptocurrency has grown steadily as a legitimate medium of exchange despite most consumers’ limited understanding of it — money that exists only as bytes on a computer hard drive — and its sometimes murky reputation as a haven for shady dealing. There are hundreds of thousands of transactions daily. Electric car maker Tesla announced in February that it soon plans to accept bitcoin as a payment method for its vehicles.
For dealers such as HGregoire, the key is ensuring the transactions are safe amid crypto’s volatility on currency markets and transparent enough to satisfy regulators.
The first aspect is addressed by using a third-party platform for the transaction itself. Once the price vehicle is agreed to, payment is made via BitPay, a U.S. firm, by the purchaser, who is charged a oneper-cent fee. The process insulates the seller from potential downside fluctuations.
“It enables us to lock in the value,” said Hairabedian. “We’re not exposed to any of those swings.”
MONEY-LAUNDERING CONCERNS
BMW-Mini Laval, a suburban Montreal dealership, also began accepting cryptocurrency in February, using a similar approach, said President Carmine D’Argenio.
“The beauty of this way of doing it, I’m not affected by the volatility of the bitcoin,” he said. “The risk is with the buyer.”
D’Argenio’s store uses Alt 5 Pay, a Quebec company with operations in Canada and the United States, and it is accepting other forms of cryptocurrency as well as bitcoin.
“The dealer is not in the crypto business, he’s into selling cars,” said Alt 5 CEO André Beauchesne.
Once a deal is done, he said, the car buyer signs onto Alt 5 Pay’s platform and pays for the vehicle in the currency of choice at the going rate at the moment of conversion. As with BitPay, the purchaser is charged a one-per-cent fee.
“There’s no risk to the dealer,” he said.
Luxury-vehicle purchases have been a conduit for criminals to launder illicit funds, often via allcash purchases, according to a 2019 report commissioned by the British Columbia government. Cryptocurrency’s blockchain ledger system is supposed to allow easy tracing of transactions. But lax oversight on some crypto exchanges could allow criminals to hide their identities and sources of their funds.
“Clearly, unless the dealers are ensuring they know who the beneficial owner of the bitcoin is, then this could be a great vehicle to launder some money,” said retired RCMP officer Garry Clement, who specialized in proceeds-of-crime and money-laundering investigations and is now a private consultant based in Osgoode, Ont., just south of Ottawa.
Hairabedian said he’s aware of these money-laundering concerns and treats cryptocurrency deals as though they’re cash deals. As with cash purchases of $10,000 or more, HGregoire reports cryptocurrency transactions to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and the Internal Revenue Service in the United States.
“We’ve done all our due diligence as if someone was paying cash,” Hairabedian said.
HGreg.com is also retaining 10 per cent of the transaction proceeds in bitcoin, which Hairabedian sees as a good asset for the company. This allows it to pay customers for trades if they want their money in cryptocurrency.
Interest in cryptocurrency transactions so far skews young, D’Argenio said, and BMW-Mini Laval is targeting the option at those buyers.
Not everyone is courting the cryptocurrency buyer, though.
“We are not conducting any business using cryptocurrency and have not had any interest ever expressed by customers,” said Bill Harbottle, president of Jim Pattison Auto Group, which owns 28 stores across Western Canada.