Developers in Colchester made a big splash recently when they became the first in the UK to sell property in Bitcoin. With the cryptocurrency rapidly gaining popularity and steadily entering the mainstream, it’s time to take a look at how to convert it into bricks and mortar.
Bitcoins, as well as other cryptocurrencies, aren’t transferred by the same systems as conventional currencies. Instead, they use a new digital system called the blockchain: a shared database that’s stored at several locations. This means there’s no central point that can fail.
Transactions are anonymous and traceable, so it’s got the potential to be more secure and less susceptible to fraud than standard transactions. However, because it’s not yet fully integrated into the economy, you'll likely need to convert your crypto-cash into sterling before you can use it.
To purchase a property with cryptocurrency, you start by negotiating and agreeing on a price with the seller, which is done via any property platform as usual. Next, you need to find a solicitor – though this could be tricky if you want to transfer the funds in a non-standard way.
The simplest option is just to transfer the funds using a system like BitPay to convert them into sterling. Once converted and in your bank account, you can transfer them to your solicitor ready for the exchange. It’s also possible to make a direct Bitcoin transfer, but you’ll need the full amount as mortgages aren’t yet available for Bitcoin deposits.
If you make the conversion from Bitcoin to sterling, there are several costs to take into account. Firstly, the volatility of the exchange rate. As Bitcoin is a new market, values change rapidly. You have to decide if the price on the day is right for you. Once you go ahead, you might also have to pay Capital Gains Tax if the value of your Bitcoin has increased significantly since you bought or mined it. You’ll also pay a conversion charge to whoever makes the transfer.
If you make the transfer directly in Bitcoin, you’ll avoid such fees, although you’ll still agree a price based on the value of your cryptocurrency on the day. And either way you’ll have to pay the usual Stamp Duty and fees on your property purchase when it’s registered with the Land Registry.