Crypto & Couches
As I sit on my couch, writing this article, at the age of '50-something', I'm not sure I would have predicted reviewing the currency of real estate acquisition via any other means other than the countries ‘coinage' the asset was in or perhaps via other traditional fx nominations, U.S. Dollar ($), EU Euro (€) or U.K. Sterling (£). The idea of 'virtual money' being used as legal tender is new for many. This type of 'stuff' is only seen in trendy movies & fantasy books, not within everyday life.
Well, hold on to your sofa because times are changing, sooner than you think.
How Millennials Are Shaping the Future of Money
Generation Y's (and Z's for that matter) wish for self-governance, self-sufficiency and a tailored experience is driving innovation right across business platforms, including personal finance.
Let's recap on the Crypto world, briefly, nothing deep, no blockchain analysis or other technical aspects, just an overview... for the moment.
Staying in a pack or breaking out from the crowd
Bitcoin is a peer-to-peer system specifically designed for online payments - a virtual currency.
As a decentralized platform system, there is no need for a central authority (like the Bank of England or Federal Reserve) to oversee transactions, which is what makes cryptocurrencies, like Bitcoin, so appealing for many of the young (and threatening to governments). There is deep resentment by the trendy 20-40 somethings to capitulate to corporate governance when they have the power to do their own thing.
Removing the middleman (the Banks) effectively eliminates interest fees and puts the holder in control. No five-days of waiting for monies to clear, or three-days for cheques (though this is less common these days).
This is potentially mind-blowing when you consider the impact such currencies can have in third world countries where access to standard bank accounts is reserved for the few, rather than the many.
With Bitcoin, you can spend and store money without a traditional account or credit card.
There are other alternative crypto's, including Ethereal, Tether, Terra, Ripple & Solana...to name but a few. All you really need is a computer or mobile phone to make transactions, and you won’t be charged hefty fees to transfer money across borders or as mentioned, wait for days on end before monies are released by the banks, and in the interim, they're earning interest on that money...the younger generation hate this hold on their financial independence and for them this is their revolution!
The Rise of Crypto and Real Estate
Cryptocurrency has been increasingly making its way into real estate transactions in various ways. This has been particularly prevalent in the U.S. and house listings.
BITCOIN BANTER OR COMMERCIALISED CURRENCY
Several sellers and agents have been using this tactic to create more buzz and attention for their properties. Some sellers have insisted on all bitcoins. Others have asked for payments split between US dollars and bitcoins. This may work well for "prime property" where the most likely buyers may have and want to use their bitcoins for real estate. This appears to be an increasing trend as many have enjoyed big wins in cryptocurrency and are looking for a way to balance that and preserve their gains by converting them into tangible property assets.
Renting Homes for Bitcoins
Expedia.com has been increasingly taking on Airbnb-style vacation rental listings. The massive travel booking site also accepts bitcoins. The rental markets have notoriously quick turnaround transactions. Blockchain platforms associated with the real estate sector provide an answer in terms of speed and safety that can considerably reduce the risk of fraud. All stages of the property transaction are involved by this innovative technology and its implications for simplifying the transit of data and reducing the time between signing pre-sales agreements and the deed of sale before legals.
Other companies have joined suit, Microsoft, Overstock, Home Depot, Namecheap, Starbucks, Tesla (sort of), Electronics, Wikipedia...others are on route, Twitter, Facebook, Google et al.
For many, this may be an increasingly popular way to lease and rent, as a way of dipping their toe in. Especially with more individuals holding small amounts of cryptocurrency, and a larger percentage of the population adopting a more nomadic lifestyle.
Crypto as a Real Estate Business
There are also physical cryptocurrency exchange offices and stores. More of these may be franchised and pop up to increase traction in the market and build trust with those slow to adopt the currency or who want to do business in person, offline. For owners and operators of these commercial properties, cryptocurrency could become a real estate business much in the way that fast food chain is.
THE BLOCKCHAIN REALITY
Real Estate Fundraising with ICOs
One of the most popular ways entrepreneurs are trying to incorporate digital currencies into real estate transactions today is by creating new currencies and tokens for buying, renting, trading, and investing in real estate, without having to conduct a traditional transaction. This is more like buying shares in a company that may own real estate.
Objectives Of Blockchain for Real Estate
If at present, smart contracts could allow real estate transfers to be made, it is also possible to imagine that they could be programmed according to the assets and the different stakeholders. Transfers could thus be carried out in an automatic way according to the conditions previously defined in the contract.
One could also imagine automatically paying the property finders, lawyers, surveyors, mortgage brokers and all other parties involved when a property is sold or purchased.
Blockchain significantly accelerates the usual processes of the property market.
As users have access to all the information stored in the blockchain, they save a considerable amount of time in obtaining data relating to a property or land — title deeds, land registry, technical information and surveys, co-ownership information, all of it becomes available 24/7, with real-time data and instant validation.
This technology is a real revolution for real estate professionals and investors alike.
If the internet has revolutionised the commercial sector in recent years through the development of marketplaces, the blockchain stands to change the real estate sector in terms of fluidity and distribution of information and transactions. As the blockchain could shake up entire sectors of our global economy, all real estate professions are now concerned with the blockchain, from recording and funding to transactions, from real estate investment to appraisals to asset management.
HM Land Registry
The first digital transfer in the United Kingdom conducted by HM Land Registry.
On 6 March 2019 the sale of a recently refurbished, semi-detached house in Gillingham had completed. It had taken 22 weeks, much longer than the six weeks the buyer and seller had expected. In early April HM Land Registry sat down with all the parties involved to see how much time it would take to run the sale and purchase through a blockchain prototype.
They used a video chat to bring everyone together. The buyer, Peter, was at work in Medway and his conveyancer was in Manchester. The seller, Stefan, was in his partner’s home in Gravesend and his conveyancer was in central London.
The Digital Street team were in Plymouth, with representatives from Yoti in London and Shieldpay calling in from Malaga, Spain. Once each action had completed (such as drafting the sales agreement) the application automatically informed the next party it was their turn to act. The demonstration of the technology ran through, end to end, in less than 10 minutes. By using blockchain technology, each party were able to see a live view of the transaction, any historical actions, and actions that still needed to happen before the transaction was complete.
By holding definitive and permanent records of a property transaction in the open, with each stage of the transfer recorded for all parties to see, there is no confusion on who needs to act next.
By using smart contracts, they enabled automation across the transaction including the transfer of funds and updating the Land Register.
PROS & CONS
Overall, the test was a success and HM Land Registry believe that blockchain technology could enable:
speedier property transactions
more trust in the transaction
higher levels of security
increased transparency for all in the transaction
Skipping along the 'crypto brick road' and tapping our heels wishing for a simpler and faster transactional process will only occur through collaboration and participation. There's no doubt that in the U.K. our conveyancing system is antiquated and needs addressing.
As a country we are influenced by sentiment & trends from across the pond, the U.S. has historically led the way with web technology and crypto; Japan, the second largest economy in the world for Bitcoin. This is not uncommon and what happens across the Atlantic tends to filter through with time.
We believe that future property transactions in the U.K., and Europe, will be traded regularly by crypto currency. Change is never easy, but typically it’s the younger generation that start the revolution; they are after all the trail blazers for future growth and development and its high time there's a shake-up of the status quo.
Advantages of jumping into Cryptocurrency & Property
Privacy when buying property
Easier international and overseas transactions
Liquidity in real estate investing
Balancing the security of bricks & mortar with flexibility of crypto currencies.
Reducing the cost of real estate transactions
Avoiding tax on transferring property rights
PR & Marketing
The battle for middle ground
Dangers of jumping into Cryptocurrency & Property
Getting raided by hackers
No downside protection and hard collateral
Scammers & entrepreneurs with no real estate experience
Control over currency prices held by very few influencers
Risk of new regulations
The party has arrived for many in this new age of trading and commoditization.
The battle between the mainstream banks and the blockchain architects / crypto traders has yet to play out in full.
The former wanting regulation, control and fee disbursement for their own velvet lined pockets, the latter resisting any attempts to mollify their own world - philosophy, psychology and engagement is a powerful driving force for these young entrepreneurs, something they feel the banks have never grasped or wanted to understand.
Ironically, this virtual insurgency in the capricious currency markets isn't about money, it's about life, freedom, choice, independence, and an almost religious belief that institutions should never be allowed to take control and run people’s lives again through, as the Generation Y & Z see it, financial coercion.
Whether the revolution they want is the one they end up getting remains to be seen.
Withe HM Land Registry test case taking just 10 minutes to conclude a sale and completion, we could see a whole new shift in how we 'value' our most important asset and our views and reasons for buying and selling could alter as a result.
We are at a crossroads on many different social, economic, political, and environmental avenues and in our world of trading in real estate, we welcome this hugely important shift in the transactional process within our marketplace.
OUR LIFE OUR WAY
Summary For Cryptocurrency and Real Estate
Cryptocurrency has been hot. Despite recent issues with crazy value fluctuations, people believe in it...and that it is the future.
For those looking for further comfort via mainstream banks, JP Morgan, Barclays, UBS, BNY Mellon, Morgan Stanley & Goldman Sachs are all getting involved in some sort of capacity.
Digital currencies have many applications in real estate, with many potential benefits for promoters, investors, individual buyers, sellers, renters, and the market itself.
Still, whilst crypto trading can be done from your couch, individuals and businesses need to be careful of the fluctuating nature of this virtual world; it will be exciting to see what is coming next, and it will be coming, even if the ride will be bumpy.