Cryptocurrency & Real Estate: What You Should Know
Bitcoin, Ethereum, and Dogecoin…imagine trying to explain these terms to someone 15 years ago. Even if you don’t understand exactly how cryptocurrency works, chances are you’ve heard stories of investors finding value in holding digital currencies. But how exactly does that value exist and what are the risks? Is it something you could, for example, use to buy a home?
Before we even attempt to answer that question, it’s crucial to make things perfectly clear. Cryptocurrency is unregulated, and is generally viewed as a high-risk investment, according to the Financial Consumer Agency of Canada. The Canadian Real Estate Association (CREA) does not offer specific recommendations or guidance when it comes to cryptocurrency, apart from member resources about how to comply with FINTRAC’s reporting requirements for what Canada’s anti-money laundering legislation refers to as “large virtual currency transactions”, and many provincial and territorial regulators across the country have taken a cautious approach.
This article is not intended to provide any advice, nor issue any particular recommendations regarding cryptocurrency. However, as cryptocurrency continues to gain prevalence, you may start seeing it more in real-world scenarios, like in real estate transactions.
In this article, we’ll cover:
How crypto works
Crypto and real estate: it’s still early
Cryptocurrencies and potential risks
How does crypto work?
The currencies we know best, such as the Canadian and American dollar, are regulated by central banking authorities and relied upon by governments for trade, investment, etc. It’s a physical asset—when we hold a $20 bill in our hands, we understand the value of that $20 and that it can be exchanged for goods and services. Inflation may impact its buying power, but on a day-to-day basis, most major national currencies enjoy relative stability.
Cryptocurrency (or often referred to as ‘crypto’) is different because it’s unregulated by any bank or central governing authority. Instead of being mined from Earth, such as precious metals, cryptocurrency is mined digitally, and like other currencies its value is determined by factors such as the limited quantity available (although different currencies use different tools for valuation).
For instance, Bitcoin has a finite amount of coins available to be mined–21 million. As of December 2024, 19.9 million have been mined, according to Investopedia. As we get closer to that supply limit, the value of Bitcoin has risen exponentially.
Instead of traditional banks, cryptocurrency ownership is allocated through blockchains, which is a digital ledger system that helps control the ownership of cryptocurrency coins. Bitcoin may have been among the earliest and most popular decentralized currencies, but thousands of new currencies have arisen since, and more are likely to follow.
So how does cryptocurrency get its value? The value is calculated against regulated funds, usually the U.S. dollar, so investors are using funds in regulated currencies to purchase and hold a portion of a cryptocurrency. Access to these currencies is encrypted; owners are given a unique identifying passcode which they need in order to access their encrypted digital wallets. Without that passcode, they can potentially lose access to their funds (you may have heard the horror stories of forgotten passwords).
You can also purchase cryptocurrencies through online investment management companies who hold your coins in trust, making it easier to access on your own.
While there are some automatic teller machines that are now buying and selling Bitcoin, for the most part, investors need to go through a third-party brokerage to transfer their CAD funds in and out of a cryptocurrency. Brokers also provide a human face to what would otherwise be a primarily digital transaction, which may create a sense of reassurance for nervous investors.
Because these currencies are unregulated, they’re not subject to the same stability that you see in most federally regulated currencies. Values can fluctuate wildly from day to day depending on investor confidence, or even internet chatter. So, the question remains, can you use these cryptocurrencies for a home purchase or sale?
Crypto and real estate: it’s still early
Jacob Asparian has been a REALTOR® since 2007, and is a broker with Keller Williams in Oshawa, Ontario, but that doesn’t tell the whole story. He has also been a self-described “Bitcoiner” for the last eight years, and is the founder and CEO of 1Bitcoin.ca, a Canadian Bitcoin brokerage. While Asparian himself has been involved with cryptocurrency for several years now, he recognizes the market is in its infancy when it comes to real estate.
“We’re just in the first inning,” he notes. “We’re building the plane as we fly.”
Asparian explains you would be hard-pressed to conduct both sides of a purchase and sale transaction of a home using cryptocurrency—it would need to be converted into Canadian dollars. If a buyer wants to accept Bitcoin, or a seller wants to pay in Bitcoin, for example, the funds would need to go through a third-party in order to be converted into Canadian dollars. Cryptocurrency is legal to purchase in Canada, but is not considered legal tender.
In Asparian’s view, there are benefits to working in currencies such as Bitcoin, one of which is the immediacy of the transaction. “It’s like comparing traditional mail to email,” he explains. In a traditional purchase and sale, funds may take hours or even days to move, and even a certified bank draft can take up to five days. With cryptocurrency, those funds change hands within moments, and the value of Bitcoin updates in real time around the clock, with the Bitcoin network settling roughly every 10 minutes.
Asparian notes “three or four years ago there weren’t even lawyers who would consider working with Bitcoin, but that is starting to change.” Lenders, too, have been slow to adapt to cryptocurrency, but are starting to show interest.
Traditionally, Asparian explains, lenders would need to see an asset like cryptocurrency converted into Canadian dollars at least 90 days prior to the close of the transaction. However, Asparian notes some lenders are gaining an understanding thanks to he and his colleagues’ efforts. Asparian says brokerages such as his are acting as the “middle man,” confirming a borrower is holding a specified amount of cryptocurrency, and that it has a specified equivalent value in Canadian dollars.
So what about the legal aspects? That’s where things get a bit more complicated.
Cryptocurrencies and potential risks
Leon Efraim is the managing partner of Thomas Efraim LLP in Oshawa, ON, and the lawyer who assists in facilitating a number of Asparian’s Bitcoin dealings. While he has helped Asparian set up his own corporate structure, and he has come around to understanding the legitimacy of cryptocurrency, he’s careful to note he has not been party to a cryptocurrency-based real estate transaction.
“It’s still too volatile,” says Efraim. “It’s still too risky for a lawyer to take on that liability.”
For lawyers, one of the key financial components in a real estate transaction is their trust accounts. Proceeds from a transaction are paid to a lawyer in trust, and then the lawyer pays the seller their portion of the proceeds. However, traditional trust accounting is simply not set up to accommodate an unregulated currency. The Law Society of Ontario carefully regulates and monitors lawyers’ trust accounting, and they’re simply not equipped to do that with cryptocurrency wallets.
Efraim also notes the risks in the volatility of a purchase.
“If someone wants, they can sign a direction for me to transfer their proceeds from a sale into a company (like 1Bitcoin), just as they would for me to transfer it into any registered savings accounts,” Efraim says. However, he notes the value of cryptocurrency can fluctuate wildly and unpredictability, and he would need to expressly warn any interested clients about such risks.
Lastly, real estate lawyers are tasked with verifying their clients, as well as the nature of any funds, to ensure they’re not facilitating suspicious transactions (such as money laundering) through bad actors. That’s easier to do with government-issued identification and regulated banks, but it becomes far more complicated in pseudonymous digital assets.
Efraim notes a buyer and seller could theoretically exchange funds directly, but lawyers are needed to sign the deed to a property, and would struggle to do so without proper verification. Lawyers are ultimately required to satisfy themselves that they have facilitated a legally sound transaction, and most would struggle to do so given these parameters.
While Efraim sees cryptocurrency as a long-lasting financial instrument, he’s careful to note that many things need to change and adapt in the way that real estate is bought and sold before it becomes routinely accepted.
“Is it coming? Certainly it is,” says Efraim, “but there’s a lot of things that need to be worked out before that time.”
The information discussed in this article should not be taken as financial or legal advice. This article is for informational purposes only.