Cryptocurrency has been on a wild ride lately, with massive fluctuations in both directions. The fluctuations understandably make some real estate brokers nervous, but many of us believe that cryptocurrencies are the future of money, and savvy brokers are getting in on the ground floor. As one of the founders of Lemon Wallet, which laid the foundation for a Bitcoin wallet framework back in 2012, I’ve been fascinated with how Bitcoin and the blockchain could transform the fundamental industries that make up the modern economy.
Other real estate brokers are sensing the possibilities of cryptocurrency, particularly in the international real estate market. A global real estate marketplace called Propy operates a decentralized title registry and creates a space for buyers, sellers and brokers as well as escrow and title agents and notaries to come together to execute transactions using blockchain. I personally do not have any relations with Propy, but I am enamored by their business and the potential transformation it can bring to real estate.
In my opinion, real estate is the perfect sector for innovation through the blockchain. According to Investopedia, "Previously, transacting high value assets such as real estate exclusively through digital channels has never been the norm. Real estate transactions are often conducted offline involving face-to-face engagements with various entities. Blockchain, however, opened up ways to change this. The introduction of smart contracts in blockchain platforms now allows assets like real estate to be tokenized and be traded like cryptocurrencies like bitcoin and ether."
Blockchain technology eliminates the need for a trusted (and expensive) party to facilitate digital transactions, allowing those involved in the transaction to use a distributed, peer-to-peer network — that is, the blockchain — instead. The implications of blockchain for the real estate industry are enormous. Blockchain can make MLS property data more centralized and accessible, title records easier to track and transfer, and it can make transactions more efficient and secure.
The growing popularity of cryptocurrencies and use of blockchain in real estate transactions is especially relevant to facilitate international transactions, where monetary controls may be an issue, and where it’s essential to establish digital trust. For example, last year, China implemented new capital controls in a bid to rein in capital flight and shore up its economy. The new rules in China restrict overseas investment in real estate, a blow to real estate brokers in the United States since Chinese investors became the largest group of foreign investors in commercial real estate last year. To keep the investments flowing past the state-imposed limitations on outbound Chinese currency, many investors are turning to cryptocurrencies, which aren’t centrally regulated.
Real estate listings in markets that are popular with foreign investors, including California and Florida, are increasingly advertising that they accept cryptocurrency. The appearance of these listings is likely driven by two factors: a desire to capture the attention of foreign investors and a desire to attract homegrown enthusiasts who prefer to pay with cryptocurrency.
The latter is a growing pool of customers who real estate brokers shouldn’t ignore. A London Block Exchange study found that millennials are cryptocurrency fans, with 5% already investing cash in cryptocurrency, 11% “definitely planning” to invest in 2018 and another 17% “seriously considering” a digital currency investment by the end of this year.
It’s my belief that in the next five to 10 years, most real estate transactions will be conducted on the blockchain. For tech-forward real estate agents and brokers, now is the time to begin experimenting with cryptocurrency by accepting it as a viable alternative to cash financing. Real estate brokers who want to attract this customer vertical can advertise a willingness to conduct transactions with cryptocurrency to stand out in a crowded space and cultivate a tech-savvy brand. The volatility in the cryptocurrency market demands caution, but cryptocurrencies are poised to disrupt the real estate industry. Real estate brokers who want to stay ahead of the curve should prepare now.