How to safely buy/sell Property in Florida using crypto currency

Cowboys will get hurt bad for making a decision they didn’t know was reportable, taxable or not explicitly legal. The "norms" and limits are being defined as we speak, (there are no norms), and its an ever-evolving, attorney-intensive, moving target.

As a first step, please immediately find an attorney and a CPA with the right experience.

Why? Because in this ill-defined environment if something goes wrong, or a public institution determines that some aspect of the transaction was done improperly or against law or policy and they want detail, or worse they accuse you of an unlawful or taxable act, you need to show you took precautions, have the evidence, and have someone professional "on the hook" to defend your actions and position.

If you aren't already working with an attorney who has been involved in, and familiar with what can go wrong, the assets you have, (crypto, Greenback, or hard assets), may be exposed in a dispute.

You're participating in a process that's evolving

Crypto real estate transactions occur within uncomprehensive rules and limits, evolving restrictions, uncustomary procedures, unexpected costs, and unintended risks, as ill-equipped state and federal laws cope with transformational changes that are ever more frequent.

They will help you appreciate what to prepare, what to pay attention to, what to evaluate, what to agree to, what to refuse, what to expect, what to send when and how much, and how to make the best decisions.

Attorneys should accompany the closing because this type of transaction is still evolving and "an officer of the court" should be present so that someone with a legal foundation can bear witness and responsibility for the guidance and actions taken.

It should not surprise you, but not all parties to the transaction accept crypto

The day will come when a mortgage can be paid off and satisfied with crypto - but not today.
Closing costs, registrations, tax authorities, associations, commissions, they all need USD even when the seller and buyer are using crypto.
That means some "fiat" (US dollars) must be available or converted.

There really is no reliable "crypto escrow" yet

As of this writing escrow of crypto currency itself is permitted to be handled by national banks, but real estate documents cannot. The main problem escrow is supposed to solve is "not sending your money to strangers".

As of today, I am unaware of a crypto escrow service with a reputation (good or bad) that's either reliable or affiliated or backed by an entity in which we can have high confidence.

None that exist have been around long enough to be considered reliable, and there is no way to know if they are even legitimate. Most are off shore. So why would you send your money to them, especially when a CRYPTO TRANSFER IS IRREVERSIBLE!?

According to Florida attorneys, Florida law does not explicitly permit escrow agents to have a crypto wallet into which they take the buyers cash to close (balance of the purchase price plus closing cost).

Until things change the existing escrow language inside the standard offer contracts must be crossed out and replaced with new clauses or an addendum, (hence the need for an attorney). As a consequence, the parties involved may not have the same protections, the same requirements, or be able to utilize the same mechanisms, (another reason you need an attorney).

In place of escrow attorneys are used to follow and observe the steps of the transaction until all parts are consummated. proceeds go directly between buyer and seller crypto accounts, if you can believe that!

One strategy has been to FIRST convert digital coin into a non-volatile "intermediary crypto currency"

That kind of crypto currency is categorized as "Stablecoin", and it was created so that there could be a crypto currency alternative that did not fluctuate, or have gains or losses against the value of the US dollar. USDc and USDt are the 2 most known and used stablecoins.

why use this intermediary step?

Conversion into stablecoin is being used as a mechanism to "freeze" the value of the crypto currency brand you are holding, much like a decision to convert ANY currency into US dollars.

The difference is that it takes milli-seconds to convert, transport, and thus freeze and deliver the value of one crypto currency into another crypto currency in preparation for transactions or converting into dollars. Otherwise, at a bank it could take days to wire and convert into USD, which could either expose you to abrupt gains or losses should the volatile crypto market change the value of your coins overnight.

Unlike other crypto currency types that are pegged to mining, a stablecoin's value is pegged to the us dollar, 1:1, and that value is derived from some actual underlying external asset (the dollar, gold, or other hard currency or asset.)


Stablecoins are currently not regulated in any meaningful way. While some issuers have state licenses, these impose minimal requirements. There are no standards requiring issuers to protect reserves or maintain liquidity. Treasury Secretary Yellen convened the President’s Working Group on Financial Markets (PWG) to discuss stablecoins. The PWG does not have any power to actually do anything about stablecoins, however. Instead, Treasury staff will soon issue a report that will recommend a path forward, which could include a mix of recommendations for actions by different regulatory agencies .and potentially Congress

It is important to realize that USDc and USDt were invented by and are controlled by private companies, and you should be comfortable with their solvency, performance, and structure (guess where they were founded). For example, as of this writing USDc's assets are public but USDt's are not, yet USDt has been around longer, and has much broader circulation in existing transactions.

Another strategy uses a crypto exchange

You will typically be faced with exchanging SOME crypto for dollars anyway, and most parties will be looking to use a reputable exchange to accomplish that like Coinbase, Kraken, etc.

Participating parties may also be looking to transact using a more reputable crypto currency like Etherium and being held in crypto wallets that are more mainstream than "Golden Dragon Wallet" or "Pink Unicorn Wallet". Behind the scenes the exchange handles the conversion and fluctuation by promising an exchange rate.

While Standard offer contracts can be used there are additional terms

The aforementioned agreement defining the form and substance of payment and exchange must make its way into an addendum or additional terms.

  • Either A specified amount of US cash will be contributed by specific parties by a specific deadline, or by a specified future deadline the transfer of a specified amount of monies in the appropriate currencies must be determined
  • The payoffs in USD, for example, must eventually be specified and agreed upon: who will receive monies, when, how much, in which format, and how that money will be converted, transferred, and applied.
  • The wallet used by the seller and buyer are with a "reputable crypto exchange", for example, one that is also a public company
  • In the absence of escrow, the attorneys of the seller and buyer are party to the agreement and charged with helping seller confirm transfer using a service, and some definition as to what indication is sufficient for the transfer to be confirmed.

Your state may require a license to buy hold or move crypto currency

Not surprisingly, states like NY for example, require those engaged in “virtual currency business activities” to be specifically regulated and to maintain a "BitLicense" or a virtual currency limited purpose trust company charter from the New York State Department of Financial Services.


NY Regulation 23 NYCRR 200.2(q)
  • receiving virtual currency for Transmission or Transmitting virtual Currency, except where the transaction is undertaken for non-financial purposes and does not involve the transfer of more than a nominal amount of virtual currency;
  • storing, holding, or maintaining custody or control of virtual currency on behalf of others;
  • buying and selling virtual currency as a customer business;
  • performing Exchange Services as a customer business, or;
  • controlling, administering, or issuing a virtual currency.

FinCen (a division of the U.S. Treasury in charge of preventing financial crimes) also regulates money transmitters via the Bank Secrecy Act (P.L. 91-508), requiring registration of “money services businesses,” including money transmitters, and imposing reporting obligations.

This whole process and every step must be agreed upon upfront

So the "form and substance of payment and escrow" must be defined and agreed upon either up front, or by a specified future deadline, so that the mortgage payoff from the seller for example is paid in USD (traditional banks and their investors also take greenbacks today not crypto! So when the buyer transfers crypto funds some portion will have to be exchanged, and that may also be a taxable event.

The west may be wild, but the sheriff is funded, organized, and on the prowl. Make sure you have what you need to report any gains (or losses). This is where the accountant recommended to you in the beginning comes into play.

Ready to use your crypto to buy property?

We have the experience and safety measures in place. There is a bit more to understand regarding transfers, confirmations, and when you are ready get in touch with us to assure your success and lower your risk and exposure

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The material in this article was graciously and professionally contributed to by:
Rich Barbara Esq. - Coral Gables Title + Escrow LLC
224 Palermo Ave, Coral Gables, FL 33134
+1 305 400 8802
rich@barretogroup.com
www.cgtitle.com

Making Crypto Less Cryptic: How to Safely Buy and Sell Real Estate With Cryptocurrency

March 7, 2022 - Daily Business Review - 6 minute read
For anyone looking to buy or sell real estate in Florida using cryptocurrency, it's imperative that they first equip themselves with up-to-date knowledge on current requirements and the right professional guidance.
Published article also available online at the Daily Business Review by clicking here

References

Issues to address on a federal and state level

  • What are your state's state escrow laws? Florida's say that they require "good funds" for the transfer of real estate: meaning a wire, cashier’s check, etc in US dollars
  • Is crypto currency or use of a crypto wallet or other similar mechanism a "money transmitter", "property", a "security", or "currency"? That may have implications on reporting, taxes, and legality
  • What must be reported?
  • Are participating 3rd parties acting in a "custodial" or "fiduciary" capacity?

The 150 different crypto currencies that Coinbase exchanges as of Jan 2022

name abbrev
0x ZRX
1inch 1INCH
Aave AAVE
Adventure Gold AGLD
Alchemix ALCX
Alchemy Pay ACH
Algorand ALGO · Earns 4.00% APY
Amp AMP
Ampleforth Governance Token FORTH
Ankr ANKR
API3 API3
ARPA Chain ARPA
Assemble Protocol ASM
Augur REP
Avalanche AVAX
Axie Infinity AXS
Badger DAO BADGER
Balancer BAL
Bancor Network Token BNT
Band Protocol BAND
BarnBridge BOND
Basic Attention Token BAT
BICONOMY (BICO) BICO
Bitcoin BTC
Bitcoin Cash BCH
Bluzelle BLZ
Bounce Token AUCTION
Braintrust BTRST
Cardano ADA
Cartesi CTSI
Celo CGLD
Chainlink LINK
Chiliz CHZ
Circuits of Value COVAL
Civic CVC
Clover Finance CLV
Compound COMP
Cosmos ATOM · Earns 5.00% APY
COTI COTI
Cryptex Finance CTX
Crypto.com Coin CRO
Curve DAO Token CRV
Dai DAI · Earns 2.00% APY
Dash DASH
Decentraland MANA
Decentralized Social DESO
DerivaDAO DDX
DFI.Money YFII
DIA DIA
district0x DNT
Dogecoin DOGE
Enjin Coin ENJ
Enzyme MLN
EOS EOS
Ethereum ETH
Ethereum Classic ETC
Ethereum Name Service ENS
Fetch.ai FET
Filecoin FIL
Function X FX
Gala GALA
Gitcoin GTC
Gods Unchained GODS
Goldfinch Protocol GFI
GYEN GYEN
Harvest Finance FARM
Horizen ZEN
IDEX IDEX
iExec RLC RLC
Immutable X IMX
Internet Computer ICP
Inverse Finance INV
IoTeX (ERC-20) IOTX
Jasmy JASMY
Keep Network KEEP
Kryll KRL
Kyber Network KNC
LCX LCX
Liquity LQTY
Litecoin LTC
Livepeer LPT
Loopring LRC
Maker MKR
Maple MPL
Mask Network MASK
Measurable Data Token MDT
Mirror Protocol MIR
Moss Carbon Credit MCO2
mStable USD MUSD
NKN NKN
NuCypher NU
Numeraire NMR
OMG Network OMG
Orchid OXT
Origin Token OGN
OriginTrail TRAC
Orion Protocol ORN
Paxos Standard PAX
Perpetual Protocol PERP
PlayDapp PLA
Pluton PLU
Polkadot DOT
Polkastarter POLS
Polygon MATIC
Polymath POLY
PolySwarm NCT
Powerledger POWR
Propy PRO
Quant QNT
QuickSwap QUICK
Radicle RAD
Rai Reflex Index RAI
Rally RLY
Rari Governance Token RGT
Rarible RARI
Ren REN
Request REQ
Ribbon Finance RBN
Shapeshift FOX Token FOX
SHIBA INU SHIB
SHPING SHPING
SKALE SKL
Solana SOL
Spell Token SPELL
Stacks STX
Stellar Lumens XLM
Storj STORJ
SUKU SUKU
SuperFarm SUPER
SushiSwap SUSHI
Synthetix Network Token SNX
Tellor TRB
TerraUSD UST
Tether USDT
Tezos XTZ · Earns 4.63% APY
The Graph GRT
Tribe TRIBE
TrueFi TRU
UMA UMA
Unifi Protocol DAO UNFI
Uniswap UNI
USD Coin USDC · Earns 0.15% APY
Voyager Token VGX
Wrapped Bitcoin WBTC
Wrapped Centrifuge WCFG
Wrapped LUNA Token WLUNA
XYO XYO
yearn.finance YFI
Zcash ZEC
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