Bitcoins are being accepted in real estate transactions for the first time, a financial wrinkle that could significantly impact the mortgage marketplace.
While banks and non-bank lenders have been leery of themortgage origination fee limitscreated by Wall Street Reform, Bitcoins may be a bigger problem because they can be used without any fees.
So what is a Bitcoin?
“Bitcoin is a consensus network that enables a new payment system and a completely digital money,” according to Bitcoin.org. “It is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen. From a user perspective, Bitcoin is pretty much like cash for the Internet.”
In other words more and more commerce is moving online. Cash is something you use at the neighborhood grocery store, at least for now. But in recent years the cost to use cash has risen substantially. Think of:
- Deposits and savings that generate little or no interest.
- Checking accounts and ATMs with endless fees.
- Credit cards with fees plus interest rates that would embarrass the Mafia.
Bitcoins — in the best case — get rid of such expenses.
In the same way that a dollar is worth a dollar because you think it is, the value of a Bitcoin is determined by public acceptance. Also like cash, Bitcoins can be moved worldwide at electronic speed without public knowledge, regulation or fees — or at least that’s the theory. Whether one day it will be revealed that the National Security Agency has tapped into the system is unknown and, for the moment at least, unknowable.
Now Bond New York, a Manhattan-based real estate brokerage firm specializing in residential rentals and sales as well as commercial leasing, says it accepts Bitcoins as payment for real estate transactions, perhaps the first real estate firm in the country to accept virtual currency.
Bitcoins and Real Estate
Why? Bond New York outlines these advantages:
- Mobile payments made easy – no sign up, swiping or PIN needed.
- Security — Transactions are secured by military-grade cryptography. Nobody can charge anyone or make a payment on others’ behalf.
- Works anywhere, anytime.
- Fast international payments.
- Zero or Low fees.
- Identity protection.
Given that Manhattan attracts large numbers of international borrowers the use of Bitcoins may well be especially attractive in that market.
Bitcoins and Mortgages
At this writing a single Bitcoin is worth $894.36, a value that may go up or down. To buy a million-dollar condo in New York would cost approximately 1118.118 Bitcoins at this writing.
Virtual currencies are neither unknown nor illegal.
“The Department of Justice recognizes that many virtual currency systems offer legitimate financial services and have the potential to promote more efficient global commerce,” said Acting Assistant Attorney General Mythili Raman in testimony before the Senate Committee on Homeland Security and Governmental Affairs.
However, she added that “the Department has two primary law enforcement interests in virtual currency: (1) deterring and prosecuting criminals using virtual currency systems to move or hide money that is used to facilitate, or is derived from, criminal or terrorist acts, i.e., money laundering; and (2) investigating and prosecuting those virtual currency services that themselves violate laws aimed at illegal money transmission and money laundering.”
Bitcoin was started in 2009 and seems to be growing with some speed. Will it evolve into an international virtual currency of great importance? We don’t know yet — but we do know that already you can buy a place in New York with it.