This column has devoted considerable attention to Bitcoin and other blockchain-based cryptocurrencies. (Ten times!) Both as to the risks and the benefits.
Lately the business news has been replete with stories about the high valuation volatility of cryptocurrencies (currently downwards). (Here is the link to one valuation tracker – note the “Global Market Cap” total on the top of the page.)
And, as reported in some of the prior articles in this series, there are other risks related to blockchain-based cryptocurrencies, such as increasing governmental regulation and institutional lender “clamp-downs” on their use. There has also been a skepticism of the inherent privacy of cryptocurrencies, such as the prospect for nefarious uses and counterparty reliability issues.
And, as reported in some of the prior articles in this series, there are other risks related to blockchain-based cryptocurrencies, such as increasing governmental regulation and institutional lender “clamp-downs” on their use. There has also been a skepticism of the inherent privacy of cryptocurrencies, such as the prospect for nefarious uses and counterparty reliability issues.
But, innovation also continues. For a recent example reported by The Miami Herald, real estate transactions paid by Bitcoin have slowly begun to occur. Recently a Miami mansion sale closed for approximately $6 million. (This was the second Bitcoin sale in Florida to-date.)
What are the risks with a real estate transaction? Let us start with the fact that the trade of value in these closings involve real property for a “virtual” and private medium of exchange (as opposed to a government sanctioned, supported, and denominated currency). Here are just two risks which come to mind. First, given the valuation volatility mentioned above, the correlation of the variable number of Bitcoin needed to achieve the contract sale price (plus other closing costs). The financial aspects of a real estate closing are reflected in a specialized and regulated spreadsheet known generically as a closing or settlement statement. How does one know the exact number of a specific cryptocurrency (plus the related transaction costs) to capture as definitive data on the closing statement at the time of closing?
Second, the psychological willingness of the parties, title companies, escrow agents, and closing agents to recognize cryptocurrencies as…currency. How does one know when the “funds” have fully “cleared” so they can be accepted as a complete, absolute, and irrevocable “payment-in-full”? As with innovations in all environments, solutions will indeed emerge and become established as reliable criteria. This blog will continue to pay heed as those solutions arise in the marketplace.
…[T]here are other risks related to blockchain-based cryptocurrencies, such as increasing governmental regulation and institutional lender “clamp-downs” on their use.
As with innovations in all environments, solutions will indeed emerge and become established as reliable criteria. This blog will continue to pay heed as those solutions arise in the marketplace.
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– For more information, call Philip N. Kabler of the Gainesville, FL office of Bogin, Munns & Munns at 352.332.7688, where he practices in the areas of business, banking, real estate, and equine law. He has taught business and real estate law courses at the University of Florida Levin College of Law and Warrington College of Business Administration. And is now the President-Elect of the Eighth Judicial Circuit Bar Association.
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