Cryptocurrencies & Real Estate

By: Eli Levine

Cryptocurrencies have been around for quite some time, perhaps the most famous, Bitcoin, was created in 2009, however, it hasn’t been until the last two years that cryptocurrencies have been truly integrated into society. Cryptocurrencies are digital currencies which operate on what is called a blockchain. A blockchain can be thought about as an online ledger, where every single transaction is securely electronically recorded, with no means of hiding the transaction record. Although blockchains have the capacity to record any type of information, currencies have widely been digitally developed to operate solely on these platforms, these are called cryptocurrencies.

As cryptocurrencies become more integrated into society, the roles that they play in society will become more diverse. One of the main areas cryptocurrencies has seen interesting expansion is in the world of real estate. In the last two years, numerous properties in both Europe and the United States have been purchased using cryptocurrencies, and this is just the beginning. As this new technology becomes more prevalent in real estate transactions, and both buyers and sellers need to be aware of what this means for them.

Sellers need to be especially aware, as younger demographics who are more interested in and or more accepting of cryptocurrencies continue to enter into the market. Some of the positive things that sellers can look forward to are a wider audience, as more and more people start to accept cryptocurrencies, more and more people will be looking to make transactions with them. Not to mention that cryptocurrencies themselves have the potential to yield massive returns on investments. That being said, sellers need to be careful on the same account: cryptocurrencies are extremely volatile meaning that unlike other assets, they can lose their entire value overnight. Sellers are also faced with a very complicated tax situation, cryptocurrency tax law is extremely new and extremely complicated, something that sellers need to take into special consideration.

As for buyers, there are also a lot of ups and downs. First and foremost, giving buyers (who are assumed to be cryptocurrency holders) the chance to purchase real estate using cryptocurrency gives them a chance to diversify their assets. Not to mention that, different from cryptocurrencies, real estate properties are more often than not locked in profits, giving buyers safe investments that are almost sure to appreciate over time. Buyers also will have increased buying power, cash buyers typically have an advantage in real estate transactions and these digital currencies are no exception. On the other hand, buyers are faced with a limited market; as the use of cryptocurrencies for real estate transactions is still extremely new, there are very little properties on the market for cryptocurrencies. Additionally, when buyers put their cryptocurrencies into these presumably safer investments, they do miss out on the chance for future growth on their cryptocurrency investments. Finally, similar to sellers, buyers are faced with the complicated tax code surrounding cryptocurrencies.

It is clear to see that both selling and buying real estate properties with cryptocurrencies hold a series of tradeoffs. This is a common dilemma for any diversification of assets, however, in the case of cryptocurrencies, these trade-offs are especially high risk and high reward. This being said, blockchain technology and cryptocurrencies are developing and integrating faster than ever before. These technologies will continue to grow and become more and more integrated into both society and the real estate world, and they have the potential to completely transform both. So although the future might not be clear for what lies ahead, it is safe to say that transactions via cryptocurrencies are here to stay and are only going to become more prevalent as cryptocurrencies become more accepted by society. With this in mind, people and companies on both ends of real estate transactions should be prepared to adopt this technology into their practices. Those who get an early start are likely to have a competitive advantage and those who don’t may be left scrambling to understand and implement this fast-growing technology.