Cryptocurrencies such as Bitcoin and Ethereum have become increasingly popular among young investors, despite being famously volatile. But, at present, buying a property with crypto remains very rare and niche – not to mention highly difficult.
With a market that continues to be unrecognised by the Financial Conduct Authority (FCA), and the Bank of England warning that cryptocurrency could be worthless, could this ever change? Will property investment via cryptocurrency ever become mainstream, despite the risks attached and the greater risk of scams and fraud?
Gilly Kennedy-Smith, partner in Mourant’s International Trust & Private Client practice in Guernsey, said there has been a resurgence of interest in not just owning cryptocurrencies but also investing in the mechanisms behind it.
“As with any investment, if you don’t understand what you are doing, you may lose your money, so what are you willing to invest and how much research are you willing to do? Most of our clients do extensive research before they invest, to ensure they understand smart contracts, blockchain and how the processes work.”
She added: “One thing that is often forgotten is how they should protect that investment and how they can ensure it is passed on to family members on their death. How they achieve this depends on how they invest, the level of investment and how they view that investment. Protections can be factored in either way and should be considered earlier on than they currently are, as this is not just a standard investment. You need to understand what you are getting into.”
Meanwhile, property expert Jonathan Rolande commented: “I suppose my main question to someone looking to buy a property with crypto, or to sell one and accept it, would be a simple: ‘why?’ It is very easy to convert crypto back to the currency of the country the property is in and, of course, currency is more stable than crypto.”
“Bitcoin is down nearly 40% in 3 months (although by the time you read this, that will have changed!). A buyer wishing to use it should arouse suspicion. It was, and often still is the go-to payment method for criminals. Sellers and their agents have a legal duty (and a moral one if you ask me) to check on the source of funds being used. By it’s very nature that’s impossible to do.”
He added: “Sellers may offer to accept it as a way of attracting more potential buyers – right now it adds a certain newsworthiness and could generate addition publicity for the home. Sellers accepting is slightly less problematical, they can easily be identified and likely bought the property with normal, traceable funds. Their problem will come when a seller arrives and might be uncheckable.”
Rolande went on: “Like many new things, there will for now be some niche transactions in cosmopolitan areas using Crypto, but I can’t see it becoming widespread for some time yet – at least not whilst we still have faith in our home-grown currency.”
That said, recent trends could increase its chances of becoming mainstream.
“According to Charles Schwab UK, half of UK investors are already trading it. So it’s mainstream use may be inevitable as younger, more tech-minded buyers come through the ranks. But my question is still this. Why?”