Cryptocurrency is a form of virtual, digital currency that exists electronically. There are many different types of cryptocurrency, however, Bitcoin (BTC) and Etheream (ETH) are the most commonly known. Although the currency does not take a physical form, (you cannot put Bitcoin in your pocket!), it is still classed as ‘real’ money and we are seeing more and more clients wishing to use cryptocurrency to purchase property. The good news is that cryptocurrency can be used to purchase property but there are some limitations that you need to be aware of.
How does it work?
Cryptocurrency is decentralised which means it does not belong to the government or any bank. With this in mind, the cryptocurrency needs to be converted into pounds sterling, for solicitors to be able to use this in a property purchase.
By using a third party wallet provider, the cryptocurrency can be sold or exchanged for ‘real’ money. The third party, once any applicable fees have been paid, can then look to transfer the sterling into your allocated bank account. Law firms have to adhere to strict anti-money laundering regulations and this includes investigating the source of wealth and source of funds for all property transactions. Therefore, once the funds are showing in your bank account, you will be in a position to prove to your solicitor where the funds have come from, which will then allow the transaction to proceed.
When using cryptocurrency towards a property purchase however, the compliance checks are slightly more detailed as your conveyancing solicitor must try to trace the currency back, and check how the funds have been converted. Full co-operation and disclosure would be required in order for solicitors to accept any form of cryptocurrency, as they must be able to prove the funds have been legitimately sourced to satisfy their anti-money laundering regulations.
Despite being in existence since 2009, this form of currency for use in property transactions is relatively new to law firms and lenders.
As cryptocurrency is still deemed as a relatively new type of tender, many law firms and mortgage lenders (if purchasing with a lender) will be cautious. Some law firms and lenders may decide to decline cryptocurrency as a source of funds, so you will need to check with them from the outset. If appointing a Broker, they should be able to assist and provide a list of current mortgage lenders that will accept cryptocurrency.
We have been inundated with enquiries since this article was publised and we are not currently taking on any further cryptocurrency matters.