Cryptocurrencies, such as Bitcoin, have recently been making headlines. In 2017, Bitcoin’s value skyrocketed exponentially. Digital currencies are a highly volatile asset, but in spite of that, they are progressively becoming widely accepted by financial and banking markets around the world as legitimate forms of payment. The hype around cryptocurrency is showing very little signs of slowing which begs the question: “Will Bitcoin become an accepted form of payment in property transactions in the future?”
The Basics of Cryptocurrency
Bitcoin is one of the most popular online digital “cryptocurrency.” It is a digital currency that exists in a decentralised online system. This online system uses a blockchain – which is a digitized public ledger of all cryptocurrency transactions – and encryption to regulate ownership. If you possess Bitcoin, what you manage is a digital key which you will use to prove to others in the system that you own a certain amount of Bitcoin.
Bitcoin can be compared to a monetary asset like gold – it is a finite asset. The Bitcoin protocol was created so there will only be a limit of 21 million Bitcoin in existence. It is nothing like fiat money (money declared by the government to be legal tender); new Bitcoins cannot be created whenever someone simply desires to do so. To be able to further release Bitcoins into circulation, they must be mined by computers solving extremely complex equations. Just like gold, as more Bitcoins are mined, it will be even more difficult to retrieve new Bitcoins. The value of Bitcoin increases when the demand for it intensifies.
Because Bitcoin is a currency that can be traded in, it is also utilised as an investment and several service providers have already started to accept it as a form of payment. It is just recently that Bitcoin has been established as an alternative form of payment in property transactions.
Due to the value of bitcoin, and its capability of being worth a high sum of money, it needs to be protected. If you have enough bitcoin to purchase a property, then you will want to eliminate the risk of having it stolen. Get in touch with an IT consultant to discuss data protection services.
Purchasing Real Property in Australia Using Bitcoin
Seeing property listings online with prices shown in Bitcoins has become quite common and the same goes for properties stating Bitcoins are accepted as a form of payment.
The unpredictability of Bitcoin, though, is one of the main limitations when using it to sell and purchase property. The value of Bitcoin undergoes daily fluctuations and this could signify that it’s asking price one
day could be a lot more (or less) the next. Doe to the fluctuation of value in cryptocurrencies, it would be smart to seek property investment advice to determine if it is worth the transaction.
A luxury home situated in Queensland was listed for 500 Bitcoins back in November 2017. That is equivalent to around AU$5.15 million at the time. As a result of the soaring increase in the value of Bitcoin in late 2017, the sellers were compelled to reduce the number of Bitcoins they were asking for.
The instability of Bitcoin contributes to the complication of the settlement process. The interval between the date the buyer and seller sign the contract for sale and when the settlement occurs can take several weeks if not months. If the amount in the contract is expressed in Bitcoin, there could be a considerable difference between the amount of the Bitcoin at the contract date and the settlement. To resolve thi
s, the sale price for the property in Australia could be stated in Australian dollars since it is more stable than Bitcoin and when it is time for the settlement, the amount payable in Bitcoin can then be calculated.
The buyer generally transfers funds into his settlement agent’s trust account as part of the settlement process. After the funds are held on trust for the vendor, they are released when the title or transfer of land has been registered. As of this writing, the capacity to hold Bitcoins in trust by conveyancers and settlement agents are unlikely.
Property transactions involving Bitcoin have the tendency to cause issues on the payment of stamp duty.
Stamp duty is computed on the sale amount of the property and can only be paid using Australian dollars.
When a property seller accepts payment in Bitcoin, he may be accountable to pay capital gains tax on any capital gains in the Bitcoin after settlement. An example is where the Bitcoin grows in value after settlement and is spent or converted to Australian dollars subsequently.
Currently, the settlement process, calculation, and payment of associated fees and charges is based on the Australian dollar. With Australian government agencies reluctance to accept Bitcoin payments pertaining to property transaction as well as the volatility of Bitcoin, it is unlikely that property transactions can be entirely paid in Bitcoin anytime soon.
It’s quite difficult to say at this point whether we are likely to see homes bought in Bitcoins becoming the norm in the near future. Bitcoin still has a brief history and predicting its future with any particular accuracy can be difficult.
At this point, paying in Bitcoin for purchases can either be the norm or it can be a flash in the pan; it can go either way. The news coverage Bitcoin is receiving recently has reached an all-time high and people all over the world has shown interest in cryptocurrency, so Bitcoin itself won’t seem to be dipping in popularity any time soon. Investment property advisors can inform you if your bitcoin is worth parting with in these transactions. You can further protect your bitcoin by either purchasing a hardware wallet or further protecting your network with cloud computing security.
People do not seem like they have been put off even after reading into the finer details of using cryptocurrency. However, it is advisable to give the currency half a year or so to really test how it progresses under the spotlight. If, within that time period, it holds its value relatively well, then it may be time to plan for a property market traded exclusively in cryptocurrency.