The first bitcoin property sale in Portugal might have appeared normal, but those who had been working for almost a year to make it happen didn’t feel that way.
On May 4, two men sat down in front of Apple laptops at an office in the northern city of Braga. The buyer received a crypto wallet address from the seller, Joo Marques, who then transferred the funds and took ownership of the flat in the city for €110,000 (about three bitcoin at the time). Jorge Silva, the head of the Portuguese Chamber of Notaries, and Carlos Santos, the chief technological officer of the Portuguese real estate agency Zome, which handled the sale, observed.
Although the entire procedure just took a few minutes, it was the result of months of negotiations between Portuguese tax, banking, and notary officials to come to an agreement on how to permit real estate transactions to only be made in cryptocurrencies.
For cryptocurrency investors, Portugal has been a sanctuary because there are no capital gains taxes on digital assets there. Silva’s office released guidelines on how notaries should handle cryptocurrency transactions in the middle of April, without the need to convert them to euros first. According to Silva, the action reveals a certain desire on the part of buyers: Crypto is a fact, he asserts, and you may now conduct legal, transparent, and compliant crypto sales.
Portugal stands out in this way. Conversion to fiat currency is still required in the majority of nations because of the lack of resources to evaluate associated tax consequences and dangers, as well as the possibility of money laundering.
Companies like Zome, which took the risk and are trying to figure out what a more established crypto real estate market would look like, have not been discouraged by this uncertainty. According to Santos, who sees opportunity to reach a new clientele, Zome started investigating the possibility of cryptocurrency transactions last summer. “If we give [crypto investors] a convenient way, in their language, to allow them to do real estate business in Portugal, then we will attract these guys to us,” Santos says.
The number of prospective buyers is expanding. Tens of thousands of users on the bitcoin network currently have digital wallets with more than $1 million in them. And a Redfin-commissioned survey of US homebuyers in December of last year revealed that 13% of first-time buyers intended to sell digital assets for a down payment, up from 5% in the third quarter of 2019.
Some investors made it rich during the pandemic as cryptocurrency trading skyrocketed, and they suddenly had the money to make their first property purchase. Those who already had riches invested in cryptocurrency as well. Nearly one in five clients already invest in cryptocurrencies, tokens, and coins, according to the 2022 Knight Frank Wealth Report, a global study of more than 600 wealth managers who manage individuals with assets worth over $30 million.
That reflected the market’s high. Rising interest rates have caused a drop in cryptocurrency prices this year that has alarmed investors and reduced the worth of all cryptocurrencies by about $2 trillion. However, interest in cryptocurrency real estate deals continues, and not just among buyers trying to turn their more volatile holdings into less risky investments.
Safe as Houses :
While some Web3-savvy investors have experimented with using their cryptocurrency cash to purchase virtual houses in the metaverse, many would prefer their digital wealth to translate into their actual lives.
In the months leading up to bitcoin’s peak in November of last year, according to Daniel Browne, a senior real estate associate at the British law firm Kingsley Napley, interest in purchasing real estate with cryptocurrencies increased. As a result of recent market volatility, he claims that the case for investing in safer assets is becoming more compelling. “People were looking at perhaps having an exit from something that is known to be volatile and then putting money into something a little bit more well-known… say bricks and mortar,” he says.
Younger first-time purchasers make up a large portion of Browne’s clientele. According to them, they “had legitimately profited through taking chances and, I assume, some luck along the way. They have now ventured onto something different.
International buyers looking to purchase second houses abroad are also interested. For this reason, La Haus, a Jeff Bezos-backed Colombian real estate firm, has tested bitcoin property sales in well-known tourist destinations including Tulum, Mexico, and the Caribbean coast of Colombia. There are just modest quantities at play. The business has sold four properties for a combined $800,000 since its first deal in January.
Dealing exclusively in cryptocurrencies prevents overseas purchasers from losing out on exchange rates and expenses when converting one currency to another, facilitating international transactions. According to Zome, nine other transactions are in the works after the company sold four Portuguese houses in the last two months to purchasers from the Netherlands, Canada, and Portugal.
Both La Haus and Zome value dwellings in a nation’s official currency before collaborating with a cryptocurrency exchange to convert that value into the pertinent cryptocurrencies every minute, reflecting the occasionally irrational swings in the value of digital coins. For instance, the price of a $9 million Los Angeles property fluctuated between 287 and 452 bitcoins in June.
Vendors have the option of accepting fiat money or cryptocurrencies. The Braga vendor, Marques, accepted bitcoin in payment. He flips residences and just sold a chain of bakeries in Budapest. He owns a design firm and a marketing and communications firm. About five years ago, Marques began making cryptocurrency investments. He now divides his cryptocurrency holdings into two pots, one for short-term trading and the other for long-term holding.
Marques is unfazed by the turbulence in the cryptocurrency markets this year. Santos claims that a lot of his clients share this sentiment. ‘Who wants to sell a house that may be worth twice [the cryptocurrency] in three months?’ we asked the first group. What’s the mentality? He claims that the response was generally consistent. Clients assured him that they were unfazed by volatility and that they were used to experiencing jarring price swings: “These investments are for the next three to four years, not the next three to four days.”
It can be more difficult to keep that mindset. Even the most unstable of fiat currencies cannot compare to the tremendous volatility of bitcoin. Prices dropped below $20,000 in June (from a peak of $68,000 in November of last year), prompting the biggest cryptocurrency exchange Binance to temporarily ban bitcoin withdrawals. Since then, some customers have reportedly been holding off in the expectation that bitcoin will rebound before making a purchase, according to Santos, but this hasn’t dimmed his own optimism.
The US cryptocurrency real estate sector is just getting started. Transactions conducted purely in cryptocurrencies are currently not possible due to aspects of the American system, such as the requirement for a “escrow” period during which dollar-denominated funds from both sides must be kept by a neutral third party.
As a result of a number of high-profile failures of crypto lenders and hedge funds that left investor assets frozen, US regulators have also adopted a more pessimistic stance toward the cryptocurrency markets this year.
That hasn’t stopped efforts to launch a cryptocurrency real estate industry. One of the pioneers was realtor Christine Quinn, who also stars in the Netflix reality series Selling Sunset, which is based in a posh Los Angeles real estate firm. Quinn and her husband, Christian Dumontet, a software entrepreneur and co-founder of the delivery business Foodler, launched RealOpen in April. The company offers properties and facilitates transactions for prospective cryptocurrency purchasers.
According to Quinn, the sector has benefited from volatility since it has made people more willing to diversify than ever before. “In actuality, uncertainty generates hype, which subsequently generates sales.” For crypto investors, who frequently want to keep their money digital up until the very last second, speed is of the utmost importance, she claims. Since buyers in the cryptocurrency market frequently do not have a lender involved and are not as fussy or detail-oriented, sales can occur more quickly: “They desire it, and they desire it now. They want to avoid waiting.
A Florida startup is offering digital cash storage for customers. Loans in US dollars are available from Milo, with cryptocurrency as security. Since April, Milo has lent $10 million in mortgages secured by the cryptocurrency assets of its clients, with loans ranging from $150,000 to $3 million per. A margin call is issued and additional collateral is required if the value of a client’s collateral ever drops below 70% of the loan value.
Some folks are alarmed by the volatility. According to Daryl Fairweather, chief economist at Redfin, “financializing mortgages when it’s predicated on collateral of other assets that you’re not really sure that the genuine worth of that asset, it gets problematic.”
Regulators in the US are likewise advising caution. The executive order directing federal agencies to present a proposal on cryptocurrency regulation by early September was issued by US president Joe Biden back in March. The Securities and Exchange Commission’s Gary Gensler has advocated for the extension of existing regulations from traditional finance to the cryptocurrency markets and has consistently urged for increased regulation of digital tokens.