By Alexander Powers
Cryptocurrency is easily one of the biggest economic buzzwords circulating the web. From the recent, weeks-long internet debate over NFTs to the growing popularity and value of Bitcoin and Ether (ETH), the conversation around crypto investments is dynamic and ongoing. It should therefore come as no surprise that the digital currency has made its way into the real estate space—rapidly becoming a norm among high-net-worth buyers.
Late last year, for instance, Brown Harris Stevens agents Keith Marks and Sonia Toth of the Keith and Sonia Team oversaw the sale of a four-bedroom unit at Miami's One Thousand Museum, a luxury condominium designed by Zaha Hadid. The $7.2 million sale was handled almost entirely in ETH, making it the City of Miami's largest cryptocurrency sale to date.
"The buyer made a generous offer based solely on the listing video we created, before ever setting foot in the unit,” said the team.
Among the reasons cryptocurrency has become appealing for real estate transactions is efficiency.
Purchasing a property using crypto can be done almost instantly, much like a Venmo transfer. Transactions made on a blockchain can employ a "smart contract" with specific stipulations such as when the digital currency needs to be converted into the U.S. Dollar. For the Keith and Sonia Team, the transaction was overseen by an attorney and a CPA, and it was agreed the conversion would happen immediately upon closing.
Other perceived advantages include anonymity and security.
Blockchain transactions are nameless. They are also generally safe thanks to their complex cryptography systems. Given that nothing in a blockchain transaction can be changed or altered, crypto transactions can potentially thwart fraud and allow for increased transparency. For real estate transactions, particularly luxury ones, this presents a significant advantage as many buyers and sellers prefer their transactions to be as discreet and secure as possible.
Beyond mere transactions, however, cryptocurrency is rapidly impacting the real estate market through other avenues, including:
The rise of cryptocurrency-based mortgages and lending systems
Digital investment properties that exist only in the metaverse
Blockchain Initial Coin Offerings (ICOs), essentially the digital equivalent to IPOs, where sellers can list their property on a blockchain for partial ownership via investment
With that being said, the full impact of cryptocurrency on real estate has yet to be assessed. There are risks involved, of course, and these can require additional considerations. Given the volatility of cryptocurrency, for instance, the down payment for the One Thousand Museum purchase was made in USD, so as to avoid currency fluctuations. Also, cryptocurrency can be vulnerable to hackers, as well as scammers posing as exchange platforms.
Furthermore, many cryptocurrency exchanges do not have the built-in background screening capabilities that banks and lenders tend to use to determine an individual's source of income. This can open the door to potential fraud or laundering.
As these concerns have been expressed by many, companies such as Milo Safew and RealT have been established to help buyers and sellers avoid fraud and prioritize transparency in the real estate transaction process.
Regardless of the potential risks, however, cryptocurrency is a rapidly growing sphere of our economy and has made an indelible mark in the real estate industry. While the future of the currency in real estate transactions remains uncertain, the possibilities for instantaneous, direct, and secure transactions yield an appeal that is not likely to die down anytime soon.
For up-to-date crypto news and developments, visit Coindesk.com