Opinion: Selling Your Home for Bitcoin – Is it Crazy, or Even Legal?
Bitcoin, also known as cryptocurrency, has been stealing the limelight in the media recently due to its significant increase in value over the last 12 months. As a potential investment alternative with little fees and tax limitations, Australians have jumped on the chance to grow a small fortune over a very short amount of time.
However, as the digital currency becomes more mainstream, is it set to infiltrate the real estate industry in Australia?
In 2013, a property in the Perth Hills worth $1.4 million was put on the market to be paid for in Bitcoin. In late 2017, a property in Melbourne was similarly advertised, with the payment available to be partly paid in cryptocurrency.
Most home buyers would look at that and be put off – especially for the ones who have no understanding of Bitcoin.
So what is it and what are the risks?
Bitcoin is a decentralised digital currency run by Blockchain, an anonymous and secure database that records digital transactions. Bitcoin enables users to send money directly to one another, eliminating the need for holding money in a bank. There is currently over one billion dollars of Bitcoin currency in the market.
However, while it appears that Bitcoin offers happy days ahead, the nature of Bitcoin is in its volatility: a day in Bitcoin is like a week or month in the real world. While there may be a lot of money to be made, there is also a lot of money to be lost – investing in Bitcoin is a gamble with a high dose of risk.
The exchange rates fluctuate dramatically – in the last 12 months, the value has increased from approximately $800 US per Bitcoin (Jan 2017) to $10,800 US per Bitcoin (Jan 2018). However, when the Chinese government closed a lot of the Bitcoin exchanges, the exchange rate almost halved overnight.
The fact that investor emotions is the fuel that drives Bitcoin is more than a little scary: a few spooked investors cause the value to plummet. With no physical backers, speculation powers the Bitcoin bubble.
Despite the risks, buyers and sellers are seeking to use Bitcoin instead of cash, and government regulators across the world are scrambling to set out guidelines for Blockchain transactions. This includes the Australian government.
A risk posed by the lack of proper regulation is brand name businesses stopping the acceptance of Bitcoin. Recently, the big four banks in Australia have frozen Bitcoin investors’ accounts and transfers to the cryptocurrency exchange.
As of June 2017, the Commonwealth Bank updated their terms and conditions for CommBiz accounts, stating that it can refuse to process an international money transfer or international cash management transaction “because the destination account previously has been connected to a fraud or an attempted fraudulent transaction or is an account used to facilitate payments to Bitcoins or similar virtual currency payment services”.
These new terms posed by the banks don’t bode well for future investors – especially for those wanting to sell or buy property using the Bitcoin system. But, it is not necessarily illegal to use Bitcoin to purchase property. In response to the Melbourne property sale, Consumer Affairs Victoria confirmed to domain.com.au that it was legal for the deposit or settlement amount to be paid in any asset or security agreed between the buyer or seller. As the Australian Tax Office treats Bitcoin as an asset, a buyer must keep a full record of Bitcoin transactions.
There is yet to be a sale in Western Australia, but if a seller were to take the leap, buyers, sellers and agents would be implored to seek legal advice to ensure they meet regulatory requirements for the holding of deposits in Bitcoin in the purchase or sale of a property.
A user of Bitcoin has compared the rise of cryptocurrency to the early days of the internet dot com era – but is it just a bubble? Only time will tell.
Right now, one thing is for sure: selling or buying a home with Bitcoin is too extreme, too futuristic, for it to be a safe and reliable investment – especially on top of all the risks in purchasing property already.