In Colorado, you might be able to buy a house for as little as 200 Bitcoins. However, that will cost you almost $800,000.
Bitcoin is a type of cryptocurrency that gained popularity in the last few years. Cryptocurrencies are digital or virtual assets. They are exchanged through online transactions that are outside of a centralized bank. While they have typically been used for anonymous transactions, cryptocurrencies are gaining popularity in real estate transactions across the world.
In the United States, Miami and San Francisco are currently experiencing the biggest cryptocurrency real estate markets in the country. One report suggests that cryptocurrency real estate transactions will make up more than 25 percent of sales in five years.
Colorado has also been privy to a few real estate transactions carried out using cryptocurrencies. The first real estate transaction using Bitcoin in Colorado involved a $1 million home in Fort Collins. After that, cryptocurrency real estate transactions began popping up in Boulder, Denver and other cities across the state.
However, there can be issues when it comes to using cryptocurrencies to purchase or sell a home. First, you must find a buyer and a seller who are willing to use cryptocurrencies. Second, even if the buyer and seller both agree, it can be difficult to find a title insurance and an escrow company that will carry out the transaction. Third, the IRS considers cryptocurrencies to be “property.” Therefore, the IRS places a capital gains tax on these types of transactions, which can dissuade potential parties.
In Colorado, the transactions have typically been done by having a buyer cash out his or her Bitcoin into U.S. dollars. Once the Bitcoin has been converted, the money is wired into the seller’s bank account at closing. While you can wire cryptocurrencies using blockchain technology, it is rarer to see this happen. Because cryptocurrencies are like stock, a buyer could lose a lot of money if Bitcoin took a significant hit following the transaction.
Real estate transactions can be complicated, especially if you are using a cryptocurrency. It can be beneficial to consult with an experienced real estate attorney to ensure your interests are protected during a real estate transaction.