“Incredibly sturdy, bizarrely anti-fragile”: that’s bitcoin, according to Anthony Scaramucci.
Most of our readers likely remember the name. Anthony Scaramucci was a White House communications director for that fleeting, ten-day period back in July 2017. Scaramucci worked at Goldman Sachs quite a bit longer (1989 – 1996), and now runs the hedge fund SkyBridge Capital. “The Mooch” decided to buy a home with bitcoin in New York City, during the 2021 crypto boom.
Crypto hasn’t been all rainbows and roses since then. Scaramucci got burned in the infamous FTX meltdown. Disappointed but undaunted, Scaramucci puts it all down to crypto’s growing pains, and points to the 77 million cryptocurrency holders in the United States as evidence of a solid trend.
Crypto Real Estate Deals: Pros and Cons for Ordinary Folk
As bitcoin edges closer to the mainstream, you might find yourself thinking about making or taking an offer involving the asset. Here are a few pros and cons to digest.
The Pros
Speed! Wiring closing funds takes a good deal of time. The whole process puts plenty of people in the middle of the transaction. But a bitcoin payment can be verified in minutes — rather than days or weeks. Wide acceptance of blockchain tech could make most of today’s professional real estate professionals and gatekeepers obsolete.
This benefit will be even more impressive for international purchases. As cryptocurrencies aren’t tied to a country, there’s no need to wait for payments to go through the costly and time-consuming process of clearing a foreign bank. Nor does bitcoin need to go through a currency exchange process, unless it’s deliberately turned into dollars during the transaction (as it often is, today).
Bitcoin runs on blockchain technology. Transactions are etched into a digital ledger that cannot be messed with. All people involved in a bitcoin real estate deal may check the bona fides of the transfer of funds and the property title. (And the parties’ personal data doesn’t go to a central hub—that’s where data hacks and breaches tend to happen.) This makes bitcoin a fraud-resistant means of payment.
Then there’s the transparency factor, which makes bitcoin resistant to shady actors. Money from standard financial accounts can be a target of fraud in the wiring process. Bitcoin defies fraud. At the same time, there’s personal anonymity for the users of blockchain-based assets. This makes them attractive to bad actors — a trait that can lead to heightened scrutiny from government authorities.
The Cons
If a home’s buyer and seller agree to a bitcoin deal, the value of the crypto asset could change sharply and quickly while they’re working out the terms of their agreement. For obvious reasons, this can create tensions: potential windfalls, potential regrets.
Then there are the tax implications. These depend on what digital asset you use. Bitcoin gets taxed as property does. There are long-term or short-term capital gains tax to be calculated, based on how much the bitcoin was worth when first acquired, and how much it was worth when it became a payment.
On a related note, the regulatory uncertainty around digital assets persists. The industry is now pressing the U.S. government to resolve it.
So, in short, paying for a home with bitcoin could have simultaneous advantages and drawbacks.
Are We There Yet?
Cryptocurrencies have turned out to be an inflation hedge for those who’ve bought in at the right times — because the Federal Reserve can’t change their value. And yet the value of bitcoin, say, a year from now is unpredictable. So, we’re not there yet. Many buyers just won’t want to take the risk.
For the non-millionaires of the world (unless they happen to live in El Salvador), bitcoin acts like an asset to be held, not to be spent.
Potential buyers will surely have reasons to use bitcoin for real estate deals in the future. And yet bitcoin is still new, risky, and volatile. Any major financial decisions that involve spending bitcoin are best carried out with the help of a financial adviser experienced in the crypto arena.
Supporting References
Chloe Taylor for Fortune.com: Anthony Scaramucci Says His Experience With FTX and “Sociopathic” Founder SBF Was “Extremely Disappointing.” He’s Now Investing in a Company Run by a Former Exec of the Imploded Exchange (Feb. 7, 2023).
Shanthi Rexaline for Benzinga.com: Anthony Scaramucci Says He Is More Bullish on Bitcoin Now Than Ever Before: “Incredibly Sturdy, Bizarrely Anti-Fragile Asset Class” (Apr. 15, 2023, citing an interview with Decrypt).
Bia Pendelton for the California Business Journal: Payment Using Bitcoin for Real Estate Transactions – Advantages and Risks (undated).
Emily Heaslip for the U.S. Chamber of Commerce (Washington, D.C.) via USChamber.com: Accepting Cryptocurrency as Payment – What to Consider (Sep. 24, 2021).
And as linked.
Photo credits: Worldspectrum, via Pexels.