Blockchain in Real Estate: An End-of-Year Reality Check

This year in cryptocurrency, we witnessed the speedy rise and fall of Sam Bankman-Fried (“SBF”), whose $32 billion company FTX filed for bankruptcy in November.

After the spectacular crash of FTX, it’s never been clearer: Controlling types who invent new coins for the market may come, and they may go.

Blockchain is the technology that gave rise to bitcoin (which is transparent), and then the flurry of crypto coins (which mostly aren’t). And blockchain’s what’s really making a difference in the real estate sphere.

After the Crash: FTX Real Estate Holdings Unravel

FTX was at the core of the second big crypto crash of 2022; the first, involving digital assets called Terra and Luna, erased $60 billion and the fallout indirectly led to a panic run on SBF’s companies’ accounts, too. Suddenly, reporters were talking about an $8 billion hole in the companies’ books.

Numerous properties associated with FTX, its leader Sam Bankman-Fried, and his friends and family members are now in the spotlight. FTX Property Holdings spent tens of millions in the Bahamas over the course of 2022.  

FTX had a presence in Tokyo and Chicago, and was planning a new Miami base. There are multiple Bahamian condos, including the $30 million Penthouse Nassau at the Orchid, overlooking a yacht marina. In addition to the string of beachfront condos and several lavish business sites, and a site purchased for a nonprofit run by SBF’s brother, there was the vacation home for SBF’s parents. (Bloomberg reports: “Mr. Bankman and Ms. Fried have been seeking to return the deed to the company and are awaiting further instructions.”)

In April 2022, Bankman-Fried was partying with Tom Brady and former heads of countries. He claimed to only seek riches to give them over to good causes. He admits to no dishonesty but does admit to taking risks. That part was well known. FTX customers could make leveraged trades. Meanwhile, SBF’s cryptocurrency trading platform allegedly gambled away its customers’ wealth without telling them. It also extended secret loans.

The appalling news just won’t stop. No doubt, we’ll learn much more as official investigations play out. New regulations are coming (and, no doubt, they will be stricter than they’d have been without the FTX debacle).

Back to Blockchain: How It Could Make Home Sales More Transparent

The National Association of REALTORS® (NAR) has formed an accelerator program that promotes the responsible use of blockchain in real estate. One of its leading members is Natalia Karayaneva, who founded the blockchain transaction company Propy. In 2022 that more than 1,000 U.S. real estate professionals have successfully taken Propy’s Crypto Certified Agent course.

Propy has handled $4 billion+ in blockchain-enabled real estate transactions to date — including the transfer of a Tampa condo that was done in just minutes. The appraisal and the whole sale, from bids to closing, is visible on a tamper-resistant ledger.

In 2022, in Tampa, Florida, the real estate tech company Propy managed the first-ever U.S. home sale by an NFT auction

Blockchain transactions let everyone involved in a transaction follow the steps in the process as they occur. The speed and transparency available with blockchain is poised to change the way people work with real estate.

The top two digital assets, bitcoin and ether, have a role to play in this change. Coins or tokens that someone invents for their own business (as Sam Bankman-Fried did with the token named FTT) are a different matter entirely. 

Will lenders agree to work with bitcoin and ether? Some will. Expect the interest rates on bitcoin-focused loans to generally be pricier, as this will begin as a niche product. Yet with NAR’s backing, it’s likely to steadily find its footing. Let’s watch what happens in 2023.

Supporting References

Curbed, a part of Vox Media, LLC: The Messy Real-Estate Fallout From FTX’s Implosion (updated Nov. 29, 2022).

Zeke Faux, with Annie Massa and Gillian Tan for Bloomberg Businessweek: The Big Take – 11 Hours With Sam Bankman-Fried. Inside the Bahamian Penthouse After FTX’s Fall (Dec. 1, 2022).

Lee Nelson for REALTOR® Magazine: How Blockchain and Cryptocurrency Are Influencing the Real Estate Market (Jun. 28, 2022, National Association of REALTORS®).

And as linked. Photo credit: RODNAE Productions, via Pexels.