Buying property with crypto – are we transforming real estate?

21 June 2021

The price of Bitcoin and other crypto assets is notoriously unstable.

Whether caused by a cryptic crypto related tweet from a billionaire inventor, or a crypto crackdown being announced by regulators of the world’s second largest economy, the rise and fall of crypto assets continues to prove that crypto can be risky business.

With this volatility and also the emergence of lenders who are prepared to consider crypto proceeds to make up a deposit, it is no surprise that we have received numerous enquiries this year from crypto investors who are ready to use some or all of their crypto investments in order to fund a property acquisition.

The difficulty is finding a suitable property with a seller who is also prepared to accept something other than fiat (government issued currency). With the volatility and lack of regulation around crypto, it is no surprise that there are very few sellers out there willing to accept crypto over fiat (for now at least). This has led to crypto investors having to either convert their crypto into fiat currency, or where they are reluctant to sell their assets (which will be a taxable event) then obtaining a collateralised crypto-to-fiat loan using their crypto assets as security.

A further difficulty crypto investors have to factor in is finding a solicitor who is willing to accept them as a client and accept their funds into their client account. Money laundering regulations not only require solicitors to take steps to verify the identity of a client, but they also require solicitors to take a risk based approach when looking to verify that the funds it will receive from a client are not the proceeds of crime. Invariably this has required us to work with our crypto investor clients to help identify the initial source of the funds used for their investment(s) into crypto and then establish an audit trail from the initial investment to the point it is cashed out.

In our next article, we will consider a market where there are more sellers willing to accept crypto, the difficulties that will need to be overcome and how this could work in practice.

Further Information 

If you would like to discuss anything raised in this article then please contact Daniel Browne, a Senior Associate in our Real Estate & Construction team.

 

ABOUT THE AUTHOR

Daniel Browne is a Senior Associate in our Real Estate team. He has experience in most areas of commercial and residential real estate matters, acting for national and SME developers, local authorities, landowners, borrowers, lenders, investors, landlords and tenants.

 

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We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.

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