In 2017, a Texan resident bought a home entirely in Bitcoin in Austin Texas marking the first ever Bitcoin real estate purchase. The Russian real estate firm, Kalinka, was hired in the same year to sell a client’s home for $8 million worth of Bitcoin. In June 2021, a $22.5 million Miami Beach penthouse was purchased entirely in cryptocurrencies, making history as the largest crypto real estate purchase ever. As of 2021, mortgage lending company Milo accepts Bitcoin mortgages in the U.S. and California based escrow company Glen Oaks Escrow, used Bitcoin as collateral in refinancing a home. The use of cryptocurrency in the real estate market continues to increase.
What is cryptocurrency?
Cryptocurrency is a digital currency that uses blockchain technology to secure payments, identities and record all transactions in a public ledger. Blockchain coupled with cryptographic algorithms make it nearly impossible to hack cryptocurrencies. Cryptocurrencies are decentralized. Decentralized currencies exist outside the control of government or central authorities. Its value is based on supply and demand much like that of a security or stock.
Is it good, bad, legal…?
Cryptocurrencies are resistant to inflation, have lower fees, faster transactions, require no third party to transfer funds and can self-generate profit. However, cryptocurrencies are a high-risk investment, take significant time to learn the trade, have a volatile price and suffer from occasional cybersecurity issues.
The legality of cryptocurrency depends on the country. For example, Bitcoin is legal in the United States, Canada and U.K. Cryptocurrencies themselves are nearly impossible to hack but exchange sites are susceptible to cyber-attacks. Forbes keeps a current listing of the best exchange sites. As of June 2022, Binance is ranked as the best and most secure site. Most cryptocurrencies users have “hard wallets” as further protection to store their cryptocurrencies in a more secure offline platform. The Securities and Exchange Commission (SEC) also seeks to regulate cryptocurrencies more closely in recent years.
- Coin: a digital form of money that is created and based in a blockchain; its purpose is to store value and be a medium of exchange.
- E.g., Bitcoin
- Token: a digital asset that represents something that can be assigned a price; usually represents physical or intellectual property.
- E.g., Non-Fungible Tokens (“NFT”)
Real Estate & Crypto. The way of the future?
The real estate industry is slowly starting to expand its horizons with the use of cryptocurrencies. Certain agencies accept coins and tokens as payment for homes, rent and financing. Some require the use of a third-party vendor to verify the tokens or coins and then turn the tokens or coins into dollars upon transaction. Some accept split payments of USD and Bitcoin while others will take Bitcoin directly. When buying or selling a property in cryptocurrencies, Bitcoin Magazine recommends finding a real estate agency and other professionals that have experience with using cryptocurrencies to make transactions.
The increased usage of cryptocurrencies has proved useful for people who have made it big with investing in cryptocurrencies. They are looking to diversify their portfolio by putting some of their cryptocurrencies into tangible assets. Companies such as Property Markets Group (PMG) and Caruso have locked into this clientele and are opening doors for future opportunities.
Per a Los Angeles Times report from April 2021, Rick Caruso of the Caruso real estate developer agency, announced they would accept Bitcoin for rent at the Grove shopping center and other Caruso owned properties. Caruso partnered with Gemini, a cryptocurrency exchange site, to make this advancement possible. He compared bitcoin and blockchain to credit cards and how they revolutionized the way we buy. Caruso “believes bitcoin and blockchain are going to be doing the same in the future… we want to be ahead of the curve.”
In late 2021, PMG partnered with cryptocurrency exchange site FTX. PMG is accepting cryptocurrencies for deposits, pre-sales and for-sales condos in its E11EVEN residences and in the Waldorf Astoria Miami. Upon purchase, the buyer’s cryptocurrencies are exchanged through FTX. Once FTX confirms the cryptocurrencies value, it then records the transactions and proceeds to convert the “coins” into cash.
PMG managing partner, Ryan Shear says,“ blockchain and digital currencies expedite the purchasing process and reduce barriers international buyers face, which is a key tool for us when developing in a growing international city such as Miami. International buyers in particular can quickly purchase a condo while avoiding international fees and bank wires, and crypto allows for the opportunity to quickly move assets from international banks and exchanges to secure American investments.”
Companies like PMG and Caruso are leading the market but are not alone. Agencies in Mexico, Russia, Portugal, and Brazil are starting to accept cryptocurrencies as payment. Government legislations are catching up to this growth and seek to prepare for future crypto investments.
This blog is available for informational purposes only and does not, and is not intended to, constitute legal advice on any subject matter. By viewing this blog, the reader understands there is no attorney-client relationship established between the reader and Wilson Bradshaw LLP. Readers are urged to consult legal counsel regarding any specific legal questions about a specific situation.