House for Bitcoin: Do cryptocurrencies have the potential to revolutionise the real estate industry?

How Bitcoin works

Once you have successfully registered with an appropriate crypto exchange, you can buy cryptocurrencies - e.g. Bitcoin - in exchange for fiat money. You can store your currencies in a digital wallet. As soon as you have installed a wallet on your computer or smartphone, it generates a Bitcoin address. You can use this digital address to send or receive money. All transactions are processed in the blockchain, a shared public accounting system.

The hype surrounding Bitcoin has not stopped at property. Flats and houses can now be bought with cryptocurrencies in many places. The blockchain can massively simplify processes and make them more secure. However, buying and selling property with Bitcoin also harbours risks.

New platforms for property transactions

Blockchain enables transactions on new online marketplaces or trading platforms. The first property was sold on the blockchain in Baar ZG in 2019.Part of the property value (approx. CHF 3 million) was tokenised or split up and then sold to four investors.

Simplified investments possible

The blockchain thus also enables fractional ownership. Investors no longer have to save up a lot of capital to invest in a property. Instead, as in the example above, they simply buy and sell tokens, i.e. shares.

More transparency and protection against fraud

The blockchain generates private, certified digital identifiers and thus protects against fraud. Compared to conventional bank letters, this system therefore offers a more up-to-date and reliable proof of capital. Buyers and sellers can securely store their data and verify it on the spot. Blockchain eliminates the need for lengthy and often expensive interactions with banks and lawyers. Properties could be equipped with an individual digital identifier that provides full information about the chain of ownership.

Low costs and efficient processes

A major advantage of cryptocurrencies when buying property is, above all, the low costs - even for cross-border transactions. Thanks to the blockchain, buyers can avoid high transfer and foreign exchange fees and purchase property in other parts of the world at comparatively low prices.

In Georgia, land register entries have recently been managed via a blockchain. The data is cryptographically secured and cannot be manipulated by anyone. This makes it easier to adjust entries when selling a house. This used to take several months and was associated with paperwork and bureaucracy. Today, Georgian buyers and sellers can complete the same process within a few days. In Switzerland, too, a land register based on blockchain has already been discussed in individual cantons.

Risks when buying and selling property

Sending a large amount of money in Bitcoin still poses a certain risk. If hackers swap addresses, for example, the transaction can no longer be reversed. Many people also forget that if a property is paid for with Bitcoin, taxes are still due. Payment with Bitcoin is not a reason to reduce taxes. The strong price fluctuations continue to be problematic. The price of Bitcoin can drop by 30 per cent within a few days. The buyer bears the risk of fluctuation.

Whether cryptocurrencies actually have the potential to revolutionise the property business will become clear in the near future. Despite all the digitalisation, Engel & Völkers is committed to providing personal and individual advice on all aspects of your property. We look forward to getting to know you.