Trading cryptocurrencies such as bitcoins is very speculative and complicated. Especially if you’re looking to buy a vacation house. There are a variety of reasons why we don’t hear much about such deals.
Bitcoin digital future or just a hype?
Bitcoins and other cryptocurrencies are currently immensely popular and the topic of much controversy. The prices of digital exchange currencies, often known as tokens in Anglo-Saxon nations, or tokens of value, are anything but steady. It fluctuates dramatically: although the equivalent value of a bitcoin to the euro was approximately 1,000 euros at the start of last year, it soared to nearly 20,000 euros in December before plummeting to roughly 5,000 euros in early February.
It’s impossible to say whether or not there will be any further shocks. Anyone who speculates on “tokens” needs to be brave. Bitcoin is simply one of many options to invest in the regulated money market on a national and international level or to make money through services. The ramifications are clear: Many people are attempting to trade the extremely speculative digital currency at a rumored high price. Alternatively, you can put them into officially regulated investment instruments. Real estate, or concrete gold, is one of them. Many people also consider purchasing vacation homes. This instantly raises the question of how lawful it is to buy real estate or vacation houses using Bitcoins and other cryptocurrencies.
Buying real estate and holiday homes with bitcoins
Dubai is not only considered a particularly extravagant patch of high-priced and noble real estate. The desert metropolis is also making headlines when it comes to paying. Some press reported in February on Britons Michelle Mone and Doug Barrowman who have started selling luxury apartments in Dubai for bitcoins. 50 apartments in their project have already been sold for up to 145 bitcoins, which was $380,000 at the time. The two Britons wanted to set an example. They succeeded in doing that, although it must be said that the apartments were priced at a fixed dollar rate. Only on the day of the contract did they become the corresponding Bitcoin rate converted. This of course minimizes the risk, especially for the seller.
The Bitcoin wallet: anonymous accounts and unknown provenance
Because the account’s owner may be traced through the matching identification, a Bitcoin account is anonymous, or a pseudonym. However, according to German law, when making a transaction, both the buyer and the seller must be able to be properly identified. “An anonymous purchase of property is not conceivable in Germany, even when paying in Bitcoin,” writes Christoph Enaux of the law firm Greenberg Traurig in an article published in the Handelsblatt on February 12, 2018. The Bitcoin wallet, or digital wallet, is only a guarantee that the equivalent of a house or vacation home is available.
The notary and the broker must always confirm the identity of the trading partner, not the source of the funds. Buying with bitcoins is the same as buying with cash from a legal standpoint. That’s when things start to get tricky.
Compare “apples to Bitcoins”
If you ask the Federal Ministry of Finance’s press office whether buying real estate with cryptocurrency is legal, you’ll be sent to colleagues at the Ministry of Justice. This does have some logic to it. After all, this is a topic that is heavily mined: money laundering and the regulations intended to prevent it. The information from the Ministry of Justice’s press office seems a little startling. “Anything may be traded for real estate.” Even in the face of an apple. And, of course, bitcoins,” was the concise response. As a result, the Ministry of Justice believes that no legal clarification is required in this case.
Purchases made using bitcoins are not mentioned in other countries because they are not aware of any such examples. They are referring to the Federal Ministry of Finance, which does not accept bitcoins as a form of payment. Brokers, according to some, are not directly involved in the financial transaction. “Should a potential buyer choose to pay with Bitcoins and involve the broker, there may be a need for action under the Money Laundering Act, such as an inspection and, if necessary, a report of suspicious conduct.” Because bigger sums of money are traded, and Bitcoins are basically cash, suspicion of money laundering arises immediately.
The position of the Federal Chamber of Notaries
The Federal Chamber of Notaries supports the Federal Office of Justice’s viewpoint. Because “in principle any asset, including a certain quantity of a so-called cryptocurrency,” can be agreed upon when purchasing real estate. The notaries, on the other hand, have yet to come across such a situation. It’s not for no cause. Because putting higher sums of money in cryptocurrencies on the table increases the possibility of money laundering. If the suspicion is confirmed, the certification must be rejected, and the facts must be notified to the Financial Transaction Investigations Central Office as soon as possible.
However, there are other reasons why bitcoins are not ideal for real estate purchases, according to the Chamber of Notaries. Because there is normally some time between the completion of the contract and the payment due date, neither the buyer nor the seller will be able to see the true worth of the agreed compensation. In many circumstances, the property is also subject to a bank land charge, and a portion of the purchase price is utilized to pay off the outstanding loan amount secured by the land charge. “The seller’s bank will probably not ‘pay out’ with a cryptocurrency,” according to the Federal Chamber of Notaries.
Furthermore, “whether the agreed amount would actually be sufficient at the time the purchase price was due to cover the outstanding loan amount” would be a question. Berlin has stated unequivocally that buying real estate with so-called cryptocurrency is not an option.
What to do with cryptocurrencies?
You can, of course, put your money into any investment. However, income from cryptocurrency speculation should not be invested directly in real estate. Only when they’ve been converted into official currencies. Real estate, particularly the purchasing of vacation houses, maybe a better investment than Bitcoins, which have a nearly guaranteed growth in value. At the very least, they’re easy on the nerves, and after all, you may have a vacation within your own walls, away from the stresses of everyday life, with a picture-perfect view from your balcony.
Everything about Bitcoins and other cryptocurrencies: mining, blockchains, and wallets.
Bitcoin as a fiat currency substitute
Bitcoins, like other digital (crypto) currencies, are a unique form of payment for people who work on the Internet. A “currency” is based on the number of networked computers rather than confidence in the system of central banks, as is the case with conventional, so-called fiat currencies. The financial crisis of 2008 was the catalyst that prompted an increasing number of people to seek alternative investments due to concerns about the value of their assets.
Mining is similar to gold panning.
Bitcoins are created as a result of services that are compensated with this currency. To do so, however, decrypting codes must first be used to promote bitcoins. Mining is the name for this pretty difficult procedure. With the passage of time, a substantial market for this currency has developed. Cryptocurrencies, such as Bitcoins, are characterized by large price changes of several hundred percent within a year as a result of this exchange.
Blockchain security
Since the bitcoin property is in electronic exchange, the personal wallet, the security of the bitcoins is still guaranteed. This value is protected by a huge number of transactions that are recorded in the ledger, which acts as a form of permanent account statement for all bitcoins in circulation. A cryptocurrency’s total number of possible units is limited; for bitcoins, this number is 21 million. As a result, a cryptocurrency is inherently deflationary. The total number of currency units is separated into discrete amounts of data to be decrypted, forming a blockchain. The higher this value, the safer the coin.
Unfortunately, speculative gains are not tax-free
When bitcoins are traded for ordinary cash on a bitcoin exchange, the difference between speculative profit (bitcoin trading) and services paid for using bitcoins must be distinguished (e.g. mining). This is especially essential in terms of taxation. Profits from speculation are considered like stock dividends, and private persons must report them on their tax filings. Mining is seen as a trading profit. Then there are trade taxes or income taxes to pay.
