According to Webster, America’s most trusted dictionary (according to Google, America’s most frequently used search engine), the word “cryptic” can be defined as “having a meaning that is mysterious or obscure.” Why then, is cryptocurrency, a term rooted in the enigmatic, becoming a popular form of payment worldwide?
Although it has been some time since I have actually put my hands on a wad of the crumpled, defiled, drug-infested greenbacks, I still relish the idea of having an adequate amount of such plush green microbic currency in the bank when I pull out my credit card. To each his own.
Cryptocurrency, for all intents and purposes, was popularized back in 2008 with the establishment of Bitcoin. Initially created with the intent to popularize a form of person-to-person payment that wouldn’t involve a bank or any other third party. This is a type of decentralized, online payment system. It operates using a blockchain, i.e. a database that stores data in “blocks” that are chained together in order to make transactions happen. Although I have a difficult time visualizing this, I supposed that is precisely why it is “cryptic.” One can “buy” cryptocurrency, such as Ethereum, Dogecoin and the aforementioned Bitcoin, on exchange apps and websites. There are online brokers who also offer services to aid investment in crypto.
While, normally, I would let the nerds just do their thing and be none the wiser, cryptocurrency has become increasingly relevant to the real estate industry; thus, I have felt compelled to nerd myself up a bit, even finding some humor in chemistry jokes just for effect.
In the past year or so, there have been three transactions recorded on the Utah Real Estate MLS (multiple listing service) that have completed the purchase through the use of cryptocurrency. I suspect we will see more in the coming months and years. Yet, while buying a home with cryptocurrency is obviously now possible, there are some considerations which must be reviewed.
First, both the buyer and seller must agree to this type of payment. Out of 2,512 active listings on our MLS, 17 of these have listed that they are willing to accept cryptocurrency as payment. The incentive for choosing this route of payment would include insurance of complete privacy when buying property, ease of use for international transactions, liquidity in real estate investing, no loan fees, acceleration of transaction, diversification and increased security.
On the other side of advantages, there are real dangers as well. For example, hackers are rampant in the crypto world, crypto presents no hard collateral, there is a threat of hypervolatility, and high risk of ever-changing regulations associated with this type of currency.
There is the other option, the third alternative, if you will, for cryptocurrency holders to use their holdings to qualify for a mortgage. Recently, Freddie Mac, one of the largest purchasers of loans in the secondary market, has approved use of Bitcoin, specifically, to secure a mortgage loan under certain circumstances. Of course, as with any government-backed program, this is subject to change. If all else fails, cryptocurrency can be exchanged for cash at any time, and we are all familiar with how cash works … although that is changing as well.
We could likely all agree that our world, in the last three years, has shifted. It has become nearly Star Trekish. We are on a fast acceleration into the future. It can be expected to become somewhat “cryptic.”
Jen Fischer is an associate broker and Realtor. She can be reached at 801-645-2134 or email@example.com.