Cryptocurrency’s Impact on Real Estate

It's Gonna Be Big

Since crypto’s inception in 2009, few industries and sectors haven’t been touched by at least its ripple effects, if not directly. The use and rise of cryptocurrency, and its underlying technology blockchain, has affected scores of industries, and real estate is no exception. Having only gained traction over the past decade, crypto’s influence in the real estate sector is set to grow and become more ubiquitous, both in the United States and globally.

Crypto, and its underlying technology blockchain, are disruptors. Crypto offers alternatives into how we exchange value, and blockchain gives us an entirely new infrastructure on which to transact. In the past, transactions, especially those of a larger nature like real estate transactions required not only the use of traditional fiat currency but also agreed upon intermediaries like banks. Today, and certainly in the years to come, real estate transactions may become entirely done on blockchains through the use of cryptocurrency and smart contracts, which enable a trustless mode of operation.

Although there are many benefits to using cryptocurrency for real estate transactions, there are also a host of disadvantages that are worth mentioning. Here are some pros and cons of using crypto as a medium of exchange in real estate:

Pros:

Anonymity: One of the primary advantages to using crypto in real estate is anonymity for both buyer and seller. Many people prefer to keep their transactions as private as possible, and using crypto is a way to make that privacy accessible to anyone.

Faster transaction times: Crypto can be exchanged almost instantly. Because crypto exchanges are recorded on a blockchain, which is essentially a public ledger, this removes the necessity of intermediaries such as banks and escrow.

Reduced Fees: While there are oftentimes fees associated with exchanging crypto, in the context of purchasing real estate, the fees of all intermediaries are eliminated, including any realtor’s fees if no realtor was used, which are upwards of 5-7 percent in many cases.

Universally Accepted: With traditional fiat currency, the specific currency you wish to use may only be accepted in one, or a handful of countries. Additionally, the buyer and seller may prefer to exchange in two different currencies. That problem is eliminated with cryptocurrency, as crypto coins are the same globally.

Cons:

Volatility: Cryptocurrency is extremely volatile, and can swing across huge price differences in a matter of hours or days. As such, purchasing real estate, which is usually a process that takes several weeks, can be risky when using crypto. The price of crypto today may be significantly higher or lower than its price tomorrow, let alone next month.

Lack of legal framework: Because crypto is still an emerging sector, is a dearth if legal and regulatory frameworks. This is true both domestically and internationally. It may be difficult or impossible to reverse a fraudulent exchange. The crypto market is essentially a “buyers beware” market.

Lack of familiarity: At least for now, crypto is not nearly as ubiquitous as fiat currency. If you are planning on using crypto exclusively for your real estate transactions, this will limit your options and will make it difficult to find a buyer or seller.

Still Evolving

It is important to remember that the use of cryptocurrency is still new. Some countries allow certain cryptocurrencies, like Bitcoin to be used as legal tender, like El Salvador, while other countries like China have outright banned the use of crypto. This is a rapidly evolving space that may take a totally unpredictable direction in the years to come.