Shiba Inu (SHIB) has recently skyrocketed and many of us who invested in the cryptocurrency are seeing nice returns. Crypto’s share of the investment market has been increasing by the day and many crypto supporters hope that it will not be long before it has similar standing to fiat currency. With financial institutions wary yet eager to gain a piece of the crypto pie, is it time to consider making property purchases with cryptocurrency?
Crypto as Legal Tender
Adopting cryptocurrency as legal tender has been an ongoing discussion in many countries around the world. In June this year, El Salvador became the first country in the world to adopt Bitcoin (BTC) as legal tender. This follows millennial President Nayib Bukele’s move to embrace crypto and promote investment and economic development.
Since then, other South American countries such as Argentina, Venezuela, and Colombia have begun to adopt crypto at rapid speed. Searching for a solution to combat relentless inflation, Argentina has become one of the countries with the highest adoption of crypto and has recently taken measures to regulate cryptocurrency operations.
Meanwhile in Ukraine, a new law was passed with a near-unanimous vote to legalize and regulate cryptocurrency and similar virtual assets. While this does not equate to accepting crypto as legal tender, it does offer protection to holders of virtual currency. Furthermore, Ukraine’s deputy minister of Digital Transformation has hinted at the country’s plan to allow crypto companies to trade directly with the banks soon.
Despite global crypto adoption skyrocketing by 2,300 percent since Q3 2019 and over 881 percent in the last year, the United States has decreased in rank in the Global Crypto Adoption Index from the sixth to eighth place. Vietnam, India, Pakistan, Ukraine, and Kenya now top the list as emerging economies look to harness the power of crypto.
Amid movement by other economies, the US has to act soon to maintain its reputation as the global leader in economic strategy. While the private sector and some individual states have enacted policies to lay down guidelines for the use of crypto, there has yet to be any meaningful collective action from the nation to improve cryptocurrency adoption.
Why Use Crypto?
People who have recently had a change in personal circumstances—like getting married or having a baby—may prefer to move away from the volatile crypto market and trade crypto for a more stable and tangible asset such as properly. While real estate may not provide massive sudden growth like crypto, its value generally continues to appreciate over time. Real estate is similarly much less likely to lose value, unlike crypto which is subject to frequent fluctuations.
For those who have enough crypto to buy out a property outright, making a deal with crypto will cut out the typical hurdles of mortgages and banks and simplify the purchasing process. Sellers who would accept crypto payments are probably going to be crypto investors as well and will consider crypto more valuable than fiat currency. Hence, they may accept a slightly lower price in light of the earning potential of cryptocurrency.
Many crypto lovers who believe in defi (decentralized finance) have the majority of their assets in crypto instead of fiat savings accounts. Thus, the opportunity to buy a home with crypto could bring additional momentum to the real estate industry. If big-ticket trades can be made in crypto, homebuyers can avoid value losses and gas fees involved in changing crypto into fiat currency.
What About Mortgages?
Unfortunately, it appears that the US mortgage industry is slow to catch up with the cryptocurrency revolution. While you may have seen lenders claim to offer a crypto mortgage, there are currently no mortgages that truly provide a loan in crypto. So-called ‘Bitcoin mortgages’ are really just regular loans where a fiat US dollar value equivalent to Bitcoin is offered.
Major lenders such as Fannie Mae and Freddie Mac remain leery of cryptocurrency due to the idea that many illegal activities are conducted with crypto. As lenders are prohibited from lending against assets derived from illegal activities, they have instituted certain rules to legitimize crypto as an asset on a mortgage application.
Should you have plans to apply for a mortgage against your crypto holdings, you must ensure that you have a full paper trail to back up your investment claim. This includes documentation of the original purchase, proof of ownership of the crypto account, and proof of the length of ownership. Finally, there must be evidence of the sale of the crypto as it is converted into US dollars and deposited into a fiat asset account.
With numerous hoops to jump through, it does not seem like securing a mortgage for a house with crypto is a prospect just yet. Besides, changing crypto into fiat to make the transaction defeats the purpose of trying to secure a crypto mortgage in the first place. Unless you are lucky enough to have a direct connection with a seller who will accept crypto for their property, buying a house with crypto remains an American pipedream.