Are we ready for bitcoin acceptance in real estate?
April 6, 2018
Sellers are broadening their buyers' pool by accepting Bitcoin as a payment method and to get increased exposure.
Some people love it, others think it's a bubble, but definitely it's something that can't be ignored. Bitcoin had a feral ride in 2017 and the price reached record highs, getting the attention of almost everyone who follows the news. Despite warnings of a bubble and recent nosedives, Bitcoin still continues to fascinate investors and there is a lot of debate among regulating authorities.
Many large companies across different industries accept Bitcoin as a legitimate source of payment; the real estate industry couldn't stay away from it. Sellers are broadening their buyers' pool by accepting Bitcoin as a payment method and to get increased exposure.
We see properties in New York, Miami, Melbourne and other major cities listed with the price in Bitcoin. There are some websites that list properties for sale only with this mode of payment.
Some developers in Dubai are advertising the acceptance of Bitcoin for their new projects. This is just the starting and it sounds a bit early to say if the acceptance will spread or decline. Before cryptocurrency is embraced as a common and trusted method of payment, concerns of regulation need to be resolved. There is also a lack of information about how it works and a growing stigma caused by massive price fluctuations and news of price crashes.
Accepting crypto for real estate is minimum risk to the seller if the currency is immediately liquidated to avoid massive and immediate fluctuations or a market crash. In January 2018, there were a number of major fluctuations where the price plummeted to less than half.
Lack of regulation
One challenge for real estate developers to accept crypto payments is the lack of regulation and integration with escrow accounts. Keeping accounts of something that may completely disappear or be banned anytime is also a challenge. For buyers seeking mortgage from traditional lenders, cryptocurrency is not yet accepted as a down payment.
Cryptocurrency has its admirers and haters, while some investment moguls say it will soon have a sad ending, others are trying to make agreements with giant companies to start accepting them as legal tender. The fact remains that the technology (blockchain) behind cryptocurrency can solve major problems and can make buying and selling real estate a frictionless experience. Transferring large sums of money is faster and cheaper with crypto and it can open new doors and make the flat world even flatter.
We live in world where we pay taxes for products and services. While making payments with a currency that is not regulated, there is no way to charge tax on it. This is a major hindrance for all industries, including real estate.
Let's put everything in a Swot analysis to see if cryptocurrency is ready for prime time in the real estate sector.
. Seamless global trnsactions
. Less transfer fees
. Security: As it's powered by blockchain
. Hardware malfunction: Wallets can crash; exchanges can be hacked
. Lack of understanding on tax
. Fractional ownership of residential real estate
. Creation of a more transparent ecosystem with smart contracts
. Rapid changes in technology
. Change in government rules
. Massive price fluctuations
As the world moves towards a cashless society, crypto seem to be the future of currency. Governments globally have started taking this seriously and are acting in favour or against it. There is a lot of debate across all industries whether crypto will change the financial ecosystem and get into our daily lives. There is, however, a lot of work to be done and problems to be solved.