In recent times, a viable substitute for the traditional model of property investment has emerged due to the rise of Bitcoin. This is extremely beneficial to Real estate buyers, sellers, property managers, as well as developers.
A small glance at AlgoCap’s website, a New York-based real estate agency will display a lot of commercial and residential properties that can be purchased through tokens using Bitcoin, which is the world’s largest Cryptocurrency.
Bitcoin has multiple use-cases as it can be used for smooth cross-border transfer of funds, in peer to peer payments, as a hedging instrument against market risks like inflation, and for exchange of various assets. But, more asset management companies, banks, and custodians need to be more aware of its massive potential.
Whenever a real estate deal is going to be signed, the buyer must undergo a KYC/AML verification to maintain a high level of transparency and authenticity. It is also offered by various third-party providers. Bitcoin presents a great opportunity to radically transform the entire industry in one shot and improve its overall efficiency by cutting down various costs. Let us discuss this in more detail.
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Some Must-Know Facts About Bitcoin Investment in US-Based Properties
- A significant supply of Bitcoin is held by retail and institutional investors in the USA.
- In case, there is a sharp fall in the value of Bitcoin, the investors put their money on precious metals or commodity stocks in exchanges.
- Transactions made through Bitcoin are faster when compared to those processed in fiat currencies. The other advantages include greater user privacy, easy execution of overseas transactions, sufficient liquidity, no need to pay any tax while transferring the property rights, and a high level of flexibility.
- It can also be easily converted into the leading fiat currencies based on the prevailing market rates. This is done by platforms like Coinbase and BitPay for a specific fee and the fiat currency proceeds will be directly deposited into the respective user’s bank account.
- Both the buyer and the seller of the property need to mutually agree on the use of Bitcoin in the settlement of the deal.
- The buyer and the seller must follow all the due diligence processes before dealing with any real estate asset in Bitcoin.
- Once a Bitcoin transaction has been executed, it is immutable.
- All the transactions made can be tracked on a real-time basis using the distributed ledger.
- Since immutability is present, law enforcement agencies and investigation bodies can prevent the illicit execution of transactions, mismanagement of funds, and help in thwarting any criminal activity.
- Bitcoin in the USA is regulated by numerous authorities like the Securities and Exchange Commission (SEC), Financial Crimes Enforcement Network (FinCEN), the Commodity Futures Trading Commission (CFTC), the US Office of Foreign Assets Control (OFAC), and the Internal Revenue Service (IRS). The 50 states in the country also have their own laws in place to regulate the widely used virtual currency.
- The regulatory authorities aim to prevent the use of Bitcoin for illegal activities like money laundering, market manipulation, and terrorism financing. It must not also be used with sanctioned persons, enterprises, and governments.
- The volatility in Bitcoin transactions is high, the settlement time is faster, and gains made on the disposed cryptocurrency needs to be paid as income tax to the government. Virtual currencies such as Bitcoin are considered property by the IRS.
- Most of the properties that accept the use of Bitcoin in the USA are located in Florida, California, Miami, New York, Texas, and San Francisco.
- Crypto-backed loans are also offered by banks and financial institutions these days.
- Many people are also renovating their existing homes by paying in Bitcoin.
- In US states like Vermont, a pilot project is being undertaken to record all the property transactions on the blockchain network.
- Platforms like Propy are providing smart contracts to automate all the business operations like recording the title deeds.
How the Use of Bitcoin in US Real Estate Will Evolve from Now On?
Many foreign investors use the anonymity of Bitcoin to stay away from currency controls and economic sanctions in their domestic countries. Still, mortgage lenders, brokers, and realtors are hesitant to accept the use of Bitcoin instead of the US Dollar due to fears about money laundering.
If more clarity is available in the future regarding taxation and regulation of Cryptocurrencies by the concerned authorities, the usage of Bitcoin in property deals will skyrocket. While some sellers accept the full payment in Bitcoin, some want it split equally between Bitcoin and US Dollars.
The different stakeholders in the Real estate industry always prefer assurance and certainty. Title insurance which is needed in case any party bows out of the property deal still involves cash as the means of payment.
Since extreme volatility is present in Bitcoin, the value of the property to be purchased may either increase or decrease affecting the buyer immensely. Many real estate buyers feel that investing in Bitcoin in a property will lead to a lot of gains as it provides stability by reducing their exposure to risk.
In the future, Bitcoin can be easily used to purchase different Real estate properties in the form of tradable tokens. The trend of using Bitcoin in real estate will skyrocket in the future. Hence, tokenize your real estate asset in the form of property tokens now and join the bandwagon soon.
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