Cryptocurrency real estate: where to buy it in the Adria region?
Real estate for cryptocurrency: where to buy it in the Adria region?
Many investors are looking to turn digital coins into a more tangible asset: real estate. The purchase of real estate with cryptocurrencies has reached its peak in the world in 2021. We checked what the practice is in the Adria region and how many such properties are sold
Ever since the advent of digital currencies, questions have arisen about their actual use. Bitcoin, the oldest cryptocurrency, is currently legal tender in only two countries – El Salvador and the Central African Republic. The first purchase using bitcoins was made in May 2010, when Laszlo Haniec bought two pizzas for 10 thousand bitcoins.
In recent years, many investors have melted virtual coins into more tangible real estate. Buying real estate with cryptocurrencies peaked during the 2021 bull run when the value of Bitcoin topped $60,000. In the spring of 2019, according to some media reports, Brock Pierce, an American entrepreneur and former actor, also known as an independent candidate in the last US presidential election, bought a house worth $1.2 million using bitcoins. According to him, he had as much as 95 percent of the value of his property in cryptocurrencies. He was the first to use Bitcoin to cover a mortgage on a property purchase.
Fluctuating local currency, escape to real estate
“Cryptocurrency purchases are growing across all industries, from small everyday purchases to large purchases of real estate, cars, art and other luxury items,” says a spokesperson for cryptocurrency payment system Naka (formerly GoCrypto). Their service allows you to make direct cryptocurrency purchases without sending funds from the cryptocurrency exchange to your bank account.
They note that purchases for cryptocurrencies are growing, especially in markets with high inflation. In these cases, buyers of high-value goods such as real estate seek to limit the risk of large losses due to local currency fluctuations. In these markets, people have no other choice, often not even access to banking services, so cryptocurrency payments are the only way to use international transfers and digital assets.
A big increase in property purchases can be found in Dubai, which, according to Naka, is most likely the result of the migration of a wealthier segment of the population. Cryptocurrency payments are becoming increasingly common in Europe as well. “In this case, it is likely a property purchase that people decided to make because of the profits they received from investing in cryptocurrencies,” they added.
Real estate for cryptocurrency: where to buy it in the Adria region? Purchase is possible in Slovenia, Croatia and Montenegro
In South-Eastern Europe, Montenegro is the leader in the number of properties on offer that can be purchased with cryptocurrency. A similar deal could also be concluded in Slovenia and Croatia. Cryptocurrency purchases cannot be made in North Macedonia, Bosnia and Herzegovina (BiH) and Serbia.
“When we talk about real estate in the EU and the Balkans, we mainly notice a lot of local transfers, that is, residents buy real estate in their homeland – Slovenes in Slovenia, Croats in Croatia,” Naka describes the situation. This does not take into account purchases by citizens of other countries, for example, UAE citizens buy real estate in Slovenia.
“There are more and more requests for real estate purchases using cryptocurrencies, although few of them reach the transaction,” admits our interlocutor, the founder of one of the Slovenian real estate agencies, which was the first in the Adria region to allow payment in digital coins. Bitcoin, the largest cryptocurrency by market capitalization, dominates infrequent real estate purchases with these currencies, while requests for purchases with Ethereum appear only sporadically, he says.
As he further explains, the reason for the low number of purchases and sales made in cryptocurrencies is mainly due to unstable periods in the economy. “We believe that in the future there will be more and more transactions from these deals,” adds the owner of a real estate agency.
Cryptocurrencies are more often used to pay real estate commissions than to purchase real estate. “Most often this is done in Bitcoin, and the process is simpler than buying real estate,” the agency says. They first issue an invoice and the customer pays through the Naka platform. “Our agency can choose whether it wants to receive payment in euros or cryptocurrency,” our interlocutor explains.
“Although the payment methods are essentially the same, each transaction has slightly different circumstances that need to be taken into account,” he says. Before payment, the buyer and the origin of the money or the purchase price are checked. Next, the date and amount of payment are agreed upon and an agreement is concluded in euros, taking into account the current exchange rate (for example, between bitcoin and euro). “The client can choose the currency in which he wants to pay,” adds the counterpart.
If the seller does not wish to receive the purchase price in cryptocurrency, Naka will exchange it at the current rate. “In this way, we guarantee that payment will be made in accordance with the contract,” says an agency representative.
When purchasing real estate with cryptocurrency, you should keep in mind that the cryptocurrency market is extremely volatile and their prices can change from day to day. At the same time, I would like to note that the regulation of this market is still in its infancy and has not yet covered all issues related to business activities.
As for Croatia, there is also so far the only real estate agency that, starting from 2021, will provide payment for agent services in cryptocurrency through the Naka platform. So far there have been only two such cases, recalls our interlocutor, the co-founder of the agency. However, he adds that so far they have not made transactions to purchase real estate for cryptocurrencies, stating that builders and developers prefer “regular” money to cryptocurrencies.
It is impossible to buy real estate in Serbia with cryptocurrency
In June 2021, the Digital Assets Law came into force in Serbia, which prescribes the conditions under which legal entities can obtain a license to provide services related to digital assets. Although the National Bank of Serbia (NBS) has so far issued two such licenses (to crypto exchangers ECD and Crypto 12), this does not mean that consumers can pay for goods or services by transferring cryptocurrency to the merchant.
In order for a citizen to pay for something with his cryptocurrency, the merchant from whom he is shopping must hire a specialized service provider with an NBS license to provide a service for accepting virtual currencies, who will exchange them for dinars. Thus, a trader on TRR will only receive dinars and not virtual currency, given that legal entities and entrepreneurs are required to conduct business through TRR in dinars.
But as NBS told Bloomberg Adria earlier this year, the aforementioned crypto exchanges are authorized to provide certain services related to virtual currencies, but none of them accept virtual currencies.
To clarify, the term “acceptance of digital assets” refers to the service that a company provides to a seller by accepting digital assets from a consumer in the amount of the value of goods or services sold, and then replacing them with the corresponding amount of dinars and transferring it to the seller’s account.
Thus, the exchange of virtual currencies for purchased goods or services in Serbia will not be possible until the company fulfills the conditions and obtains a license to provide a service for accepting virtual currencies. No such permits have been issued in this country yet.
Most of the so-called crypto real estate in Montenegro
Based on an analysis by the Global Initiative Against Transnational Organized Crime, three luxury apartments were sold in Budva, Montenegro, for 420 Bitcoin ($3.2 million), and a local investment association is promoting the use of digital currencies in hotels and resorts in this tourist destination.
On the Crypto Real Estate website, a global platform that brings together all players in the world of real estate from buyers and sellers to agencies and developers of real estate projects, hundreds of properties in Montenegro are currently advertised at prices ranging from 10 to 171 bitcoins (from 270 thousand to 4.5 million dollars). Three properties are being sold in Croatia for between 60 and 79 bitcoins (1.6 to 2.2 million). In Slovenia, only one property is for sale, namely a plot of land for 21 bitcoins (almost 600 thousand euros).
There are several options for purchasing real estate with cryptocurrency
SALE OF CRYPTOCURRENCY. The first and easiest option is to sell crypto assets for so-called paper money, with which we then buy real estate. In this case, problems may arise, especially if the amounts are large, when the origin of the money must be explained to the tax authorities.
CRYPTOCURRENCY FLAG. Another option is to use cryptocurrencies as collateral, similar to how you would pledge stocks or other securities. We pay slightly higher interest rates on borrowed money. A quick look at some providers shows that they currently hover around eight percent.
DIRECT BUYING CRYPTO. The third way to buy real estate is to directly exchange cryptocurrency for real estate. Some merchants have chosen to only accept certain cryptocurrencies, such as Bitcoin or Ethereum. Real estate purchases are higher value purchases where the payment process is more complex than everyday purchases of lower value. For payments of higher amounts, payment service providers must fully comply with anti-money laundering and anti-terrorist financing legislation (Anti Money Laundering – AML), Naka explains.
“Before conducting a transaction, we must properly verify both the payer and the payee. This ensures that we have all the important information about the origin of funds and prevents the possibility of financing from illicit funds.” In accordance with the law, reports of purchases of higher value are always submitted to the appropriate authorities. “The entire payment process must be completed correctly, including the immediate conversion of funds from cryptocurrency to fiat currency and sending the funds to the appropriate bank or other account,” the site explains.
