Legibloq

How to Buy Real Estate with Cryptocurrency?

Maxime
Maxime
11/18/2024, 1:23 PM
Buying real estate with cryptocurrencies like Bitcoin (BTC) or Ethereum (ETH) is an emerging trend that raises a lot of questions. Blockchain technology and crypto-assets offer exciting opportunities to simplify and secure transactions. Their adoption by the general public is rapidly growing, as shown by the latest study from the Digital Assets Development Association (ADAN) conducted by KPMG. Despite this growth, the use of cryptocurrencies in real estate is still limited.
There are challenges to overcome, such as the reluctance of banks, skepticism from real estate professionals towards these new technologies, the volatility of cryptocurrencies, and regulatory and tax compliance. These obstacles need to be addressed when buying property.
This article serves as a practical guide to help you understand the challenges and solutions associated with buying real estate using cryptocurrencies, along with tips for securing and optimizing such an investment.

Challenges of Buying Real Estate with Cryptocurrencies

Banks' Reluctance

Although the financial sector has been actively involved in blockchain for years, traditional retail banks are still not very open to cryptocurrencies, and arbitrary account closures remain common.
It is difficult to know exactly how your bank will react to euros coming from a crypto platform, so it is recommended to discuss this with your banking advisor before making large transfers. However, even having your advisor's approval doesn’t guarantee there won't be issues, as the blocks can come from different decision-making levels. Nothing is more frustrating than having your purchase delayed or even canceled due to a refusal of funds at your bank!
This is why avoiding traditional bank accounts for real estate transactions involving cryptocurrencies can be an advantage for securing the operation.

Skepticism from Notaries and Real Estate Professionals

Buying or selling a property requires working with a notary to oversee the transaction, and often with a real estate agent too. However, very few notaries and real estate professionals are currently willing to handle transactions involving cryptocurrencies. This can lead to longer transaction times and make the process more complex.
For more information about opportunities and challenges related to real estate and cryptocurrencies, check out this article by IAD France on investing in real estate with cryptocurrencies.

Cryptocurrency Volatility

One major challenge in buying real estate with cryptocurrencies is their volatility. Digital asset values can fluctuate significantly in just a few hours, meaning that an amount sufficient to buy a property today might not be enough tomorrow.
To address this issue, there are different solutions. One option is to avoid exposure to the specific volatility of cryptocurrencies by converting your assets into a stablecoin that complies with the current European MiCA regulations, such as USDC or EURI.
Another option is to use over-collateralization to secure a certain value of funds until the transaction is finalized.
For more on this topic, you can read this article by Cryptoast about stablecoins and MiCA.

Evolving Legal Framework

The laws governing cryptocurrency transactions vary from country to country and are evolving quickly. In France, buying real estate with cryptocurrencies is possible, but as with any financial transaction, you must work with regulated professionals to ensure the source of funds is fully validated and all parties are identified to guarantee compliance with legal requirements.
Tip: To avoid legal issues, it is recommended to consult a lawyer or legal advisor specialized in cryptocurrency legislation. For more on the legal framework, see this article by BFMTV about crypto regulation & real estate investment.

Tax Compliance

Another specific aspect of buying with cryptocurrencies is the tax implications related to their conversion. In France, tax liability arises when cryptocurrencies are converted into traditional currency (fiat) or when ownership is transferred.
If you convert funds for a transaction that later gets canceled, you are still liable for the tax due.
Useful : For more information on the french tax regime for cryptocurrencies, visit the government website.

So, Is It Possible ?

YES, buying real estate with cryptocurrencies is entirely possible, but it requires careful preparation and specific precautions.
To minimize risks related to volatility and the legal framework, it is essential to gather the right information and work with specialized experts.
These precautions ensure a smoother buying process and increased security for both the buyer and the seller.

Buying Real Estate with Cryptocurrencies in 4 Steps

1. Find a property

So, how do you get started? To carry out a 3.0 real estate transaction, the first challenge is simply to find a property that suits you.
You might think that to buy with cryptocurrencies, you need to limit your search to sellers who accept crypto payments, but we advise against this since it unnecessarily limits the market options.
Of course, if you prefer to go this route, you can look at real estate platforms or agents who specialize in crypto transactions, and ensure that the terms of conversion and the sales contract are clearly defined - ideally with help from a specialized notary or lawyer.
However, there are solutions that allow you to extend your property search to every traditional channels. A solution like Legibloq, for instance, allows you to pay the seller in either crypto or fiat currency. In this case, the operation is seamless for the seller: they sell their property in euros and receive euros.
Additionally, you will need a notary who is able to assist you. Legibloq can also connect you with one of its partner notaries (its network also includes lawyers and real estate professionals).

2. Use Crypto Escrow to Secure the Funds

You've found your dream house, and you certainly don’t want to lose it. This is where escrow comes into play. The role of escrow, as proposed by Legibloq, is to hold a sufficient amount of the buyer's cryptocurrencies to secure the future transaction, whether it involves fiat or crypto.
A contract is signed with the escrow to formalize the safeguarding of the funds. It specifies, among other things, the conditions for releasing the funds, including the information of the final beneficiary when funds are called upon prior to the conclusion of the sale.
The escrow operation provides sufficient guarantees by locking dedicated funds (in this case, crypto) to enable all parties to move forward with confidence.
Importantly, for the third party acting as the escrow holder to carry out this operation, they must be registered as a Digital Asset Service Provider (DASP or PSAN in French) with France’s Financial Markets Authority (AMF). This ensures compliance with current regulations, particularly in terms of user protection and the fight against money laundering and terrorist financing. 

3. Transaction Success or Cancellation

Successful Transaction

Great news - the sale is finalized. What happens next? It's simple, there are two possibilities: 
  • The seller accepts payment in crypto, and the escrow transfers the ownership of the cryptocurrencies directly to the beneficiary.
  • The seller wants payment in fiat currency, so Legibloq converts the crypto funds to euros instantly and transfers them to the beneficiary in line with their preference.

Failed Transaction

If the sale falls through, another benefit of using an escrow service is that the buyer is not disadvantaged. Their assets are returned without being subject to taxation, as no conversion took place.

4. Finalizing the Transaction

Even if cryptocurrencies are used to buy the property, some costs, such as notary fees and registration duties owed to the public treasury, must be paid in euros. Therefore, a payment in euros will be necessary before finalizing the transaction.
Working with the right professionals (specialized lawyers and/or notaries) ensures that all costs related to the transaction and associated conversions are understood and declared properly.
Note: In France, it is mandatory to declare the source of funds and to pay taxes on any gains made when converting cryptocurrencies into euros. Legibloq can arrange a consultation with one of its partner tax lawyers or accountants who specialize in these topics.

Conclusion

Buying real estate with cryptocurrencies is now a real possibility, even when the seller prefers traditional currencies. Thanks to innovative solutions like Legibloq, the process is simplified and secure. The escrow service, quick and secure crypto-to-fiat conversions, and a clear legal framework help make your real estate project a success.
To ensure a successful real estate transaction with cryptocurrencies, feel free to learn more about the services offered by Legibloq. With the right tools and support, investing in real estate with crypto can become a concrete reality—and it’s simpler than you might think.