According to a recent article by the Canadian Real Estate Association (CREA), a growing number of Canadians are beginning to wonder about the intersection of cryptocurrencies and real estate—or more specifically, whether or not we’ll be seeing homes in Canada bought and paid for with cryptocurrency anytime soon.
The jury may still be out on whether using cryptocurrency to purchase real estate is a good or bad idea. But regardless of which side of the debate you’re on, as cryptocurrencies become even more popular and widespread than they already are, it’s a question that buyers and sellers may have to start deciding for themselves very soon.
What are cryptocurrencies?
Simply put, a cryptocurrency is any kind of currency that exists exclusively in a digital or virtual format. Instead of being issued by a central bank or national government, cryptocurrencies are recorded and issued through a decentralized peer-to-peer system, and secured using electronic encryption
The first and still best-known cryptocurrency, Bitcoin, was originally issued just 15 years ago, in 2009. Today, there are dozens of different cryptocurrencies available to Canadian investors, and the cryptocurrency market is now valued at a total of more than $3 trillion.
What are the benefits for buyers and sellers?
While cryptocurrencies aren’t considered official “legal tender” by the Canadian government, there’s technically no law against using cryptocurrency to buy real estate in Canada. But as with most new technologies, using a cryptocurrency to purchase a home can pose both some unique risks and some compelling benefits for buyers and sellers.
For sellers, selling your home for cryptocurrency can be an interesting marketing tool and a novel way to gain attention for your listing. It can also open your property up to people who might not otherwise have made an offer.
For buyers, cryptocurrencies can speed up the process of buying or selling a home, as they can be transferred instantly rather than taking hours or even days to process. Plus, for those with extensive investments in cryptocurrency, converting some of those more speculative assets to something as traditionally stable as real estate can be a wise financial move.
What are the risks?
But there are some significant risks as well. For example, using cryptocurrency to buy a residential property could potentially result in capital gains taxes, pose legal problems with setting up a trust to complete the purchase, or possibly even trigger an anti-money laundering investigation by the Financial Consumer Agency of Canada.
In addition, because the value of any given cryptocurrency can swing wildly from one day to the next, you could agree to sell or buy a home for a fixed amount of cryptocurrency, only to end up having that amount be worth substantially less (or more) than you expected by the time the closing date rolls around.
Of course, you could always mitigate that risk by simply converting the cryptocurrency to the agreed-upon number of Canadian dollars when the property is sold. But if you want to pay directly with cryptocurrency and can’t afford to buy the property outright, many banks and other lenders in Canada still tend to shy away from accepting them. It can therefore be much harder to get a mortgage if you use or accept cryptocurrency as the down payment.
What does the future hold for cryptocurrency and real estate in Canada?
The bottom line is, it’s still too early to tell when (or if) cryptocurrencies could become an accepted part of the real estate market in Canada. But if that day isn’t here yet, it’s almost certainly coming, and probably sooner rather than later.
So if you’re curious about the role that cryptocurrencies could soon play for either homebuyers or sellers, talk to your lawyer or financial advisor, ask your REALTOR® for advice, or contact us for the answers to any questions you may have.