The pitch for cryptocurrency is “money for the digital age,” a transformation akin to the transition from the gold standard to fiat currency in the 1930s. Crypto offers decentralized currency which is meant to circumvent the “from on high” centralization of government-backed currency. Transactions and ownership are encoded within “Blockchain,” essentially a digital ledger.
It’s not confined to the internet either. Properties have been sold as “NFTs,” or non-fungible tokens/unique assets within blockchain. There’s certainly a market of home buyers interested in making purchases this way, and teams are adjusting to meet this demand.
But remember: if it sounds too good to be true, it probably is. Crypto’s problems have been well-documented. Here are some ways cryptocurrency could impact you and other real estate professionals.
You’ll limit yourself
The whole point of currency, and exchanging it, is that it has universally agreed upon value. Cryptocurrency comes with an inherent disadvantage—not everyone recognizes or accepts it. If you become a crypto-transaction specialist, your client pool will be limited. If you accept payment in crypto, you’ll be just as constricted in what you can spend your earnings on in your private life. Who does recognize Crypto? The U.S. Government. Despite lack of regulations, crypto transactions are considered taxable.
Value is too volatile
Another problem of value comes from the crypto market’s instability. Bitcoin, for instance, reached $61,195.30 on March 13, 2021, only to fall to $29,793.80 by July 20, 2021. These sorts of fluctuations might be tenable if you are dealing in securities, but currency requires more stability to be usable. Dogecoin has experienced similar highs and lows of value. Inflation and interest rates are already plaguing agents and brokers; do you want a market with potential for such devaluation added to the mix?
Accessibility, or lack thereof
Crypto wallets are opened by private keys; what secures ownership is that you have the key. As Frank Muci (a Policy Fellow with the London School of Economics) has written about, this creates many potential problems for storing real estate transaction data or homeownership deeds in these wallets. Say your client dies unexpectedly and didn’t leave behind knowledge of the key. Now, the transaction simply can’t be completed.
Potential for fraud
Critics of cryptocurrency have compared it to multi-level marketing schemes. Some have taken it a step further into outright fraud. Jordan Moody, an Indiana agent with William Raveis affiliate Moody & Company, has spoken about real estate scams he’s witnessed; buyers respond to false home ads and are swindled out of move-in costs. The latest innovation to these scams is to ask for cryptocurrency payment. This plays on public ignorance of crypto and the difficulty that comes with retrieving the money after the transaction is over.
There are no arbiters of misdeeds
A perk of cryptocurrency—decentralization—comes with drawbacks. Government-backed currency is under the authority of those governments. This means that law enforcement and the judiciary act as recourse for people who’ve had their assets stolen.
There’s no human arbiter of a blockchain, only “Smart contracts,” and code simply can’t compare with a human brain. Stealing a home might seem impossible, but not with crypto. Let’s say your buyer purchases a property as an NFT. Someone could then steal their private key and transfer said NFT to themself.
Devin Meenan is RISMedia’s editorial assistant.
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