Buying Properties Using Cryptocurrencies
Blockchain technology has taken the world by storm bringing greater accountability, traceability and authentication of the identities and antecedents of different parties to a transaction. It is a matter of time before this technology is applied to high value transactions such as in the Real Estate world which are fraught with risks and deliverables on both the buyer and the seller.
Previously, using digital channels in high-value asset transactions such as real estate, were not very common. Real estate transactions usually were conducted offline with key steps such as verification, legal agreements and inspections done in person or in physical agreements. These add to transactional costs and add risk and complexity and so the ecosystem is watching carefully new technologies such as smart contracts powered by blockchain which will allow these to be performed with great ease. Among various countries, the government of Dubai has shown the way in being proactive in adopting these technologies for transactions. As an example, the Dubai Land Department has in 2017, created the Blockchain system using a smart and secure database that records all real estate contracts, including lease registrations, and links them with the Dubai Electricity & Water Authority (DEWA), the telecommunications system, and various property-related bills. Blockchain’s secure, electronic real estate platform incorporates personal tenant databases, including Emirates Identity Cards and the validity of residency visas, and allows tenants to make payments electronically without the need to write cheques or print any papers. The entire process can be completed electronically within a few minutes at any time and from anywhere in the world, removing the need to visit any government entity.
How does the whole process work when it comes to buying properties using cryptocurrency?
The first criteria to complete a real estate purchase agreement through cryptocurrencies is that both the parties, the buyer and the seller, must agree to perform the transaction in a designated Cryptocurrency.
While traditional transactions are more or less resistant to market movements, the volatility of Bitcoin and other cryptocurrencies makes it mandatory that they also set a record time for the transaction so that the number of coins is transferred at that moment via the secure contract.
Following the record time of the transaction, the seller may then choose to convert his proceeds from the cryptocurrency to a real-world currency of his choice using one of the many exchanges.
Are Cryptocurrencies the Future of Real Estate?
There are several ways to answer whether cryptocurrencies are the future of real estate investments or not. Real estate transactions typically involve multiple risks. However, they are also linked to real assets that lie in countries and legal recourse for the buyer and seller are usually to the courts in that country. As such, government sanction and acceptance of blockchain-based contracts and cryptocurrencies will be very important in deciding their legality and suitability for such transactions.
In certain situations, such as off-plan properties or complicated transactions where the seller or the buyer has multiple deliverables to adhere to, it is conceptually very attractive to use smart contracts to police both sides and hold them accountable. This may also be very attractive in jurisdictions that are remote or inaccessible or where the law is weak and hence trust is limited. However, this is a space investors should watch and keep track of official government sanction to this mode of transacting. In the meanwhile, it would probably be wise to either focus on countries that are proactive like the Emirates or else continue to transact with paper trails in addition to the blockchain contract.