$2.5M lot in upscale B.C neighbourhood seeks Bitcoin buyer

Victoria financial advisor may make history by accepting cryptocurrency for luxury lot

A vacant lot in the Uplands – one of North America’s premier residential developments near Victoria, B.C.– is on the market and looking for a Bitcoin buyer. In a neighbourhood that prides itself on history and tradition, lot owner Hugo Donais could make Canadian history with one of the first bitcoin residential real estate deals.

The lot at 3165 Midland Road, with an asking price of $2.5 million, was originally listed in the standard fashion in November. A lull in the luxury market has motivated Donais to add the Bitcoin option this week. Donais is hoping the additional payment option will give him more prospective buyers by potentially attracting international investors.

In a 2017 Canadian Market Report, Greg Carros, a license partner for Engel & Völkers Vancouver, noted that 85 per cent of luxury property transactions in Vancouver are international buyers, the majority from China. Pairing that with the Financial Times claim that 98 per cent of recent bitcoin transactions originated in China, Donais may be playing his cards right.

In China, citizens are capped at taking no more than $50,000 U.S. out of the country, and in 2017 new regulations were put in place to prohibit the exchange of yuan for real estate, making it hard for investors to get money out of the country. Bitcoin can circumnavigate those restrictions as it is a decentralized system that is not controlled by central banks or any country, and can be traded anonymously. It is a way for foreign buyers to move money.

But Donais’s decision is not without risks.

As a financial advisor, Donais was clear that he does not endorse or recommend the process for others unless they have a deep understanding of the market and get comprehensive professional tax and legal advice to appreciate all the possible consequences and risks associated.

“This is a transaction that I am comfortable with, but I don’t necessarily recommend it for others,” said Donais. “I think people should be careful. I do this for 12 to 14 hours a day so I have a comprehensive understanding of it. It is extremely risky if you don’t understand all the different layers of complexity.”

One of the layers of complexity is that the deposit and the realtor’s commission can not be paid in Bitcoin or any other cryptocurrency due to FINTRAC (Financial Transactions and Reports Analysis Centre) responsibilities under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). Basically, when there is a large cash transaction, realtors are required to report the identities of those involved in the transaction. And the point of Bitcoin is that it is anonymous.

“While cryptocurrencies, such as Bitcoin, can be used legitimately for many purposes, there are also significant risks associated with them, including the risk that the currency may be used to disguise the source of money derived from criminal activities – commonly known as money laundering,” said a representative from Real Estate Council of BC. “Buyers can legally use cryptocurrencies to purchase real estate, but brokerages cannot accept deposits in cryptocurrencies, because cryptocurrencies exist outside of the purview of banks and governments so they cannot be held in trust.”

When asked if they have statistics on how many houses or properties have been purchased using Bitcoin, the Real Estate Council of BC said they don’t have statistics as they don’t monitor sales.

When asked the same question, Brendon Ogmundson, an economist at the British Columbia Real Estate Association (BCREA), said they track sales through MLS which means the properties are sold by realtors. With the realtors not being allowed to accept their commission through Bitcoin, Ogmundson said those sales wouldn’t be coming through a realtor, so they would have no way of tracking the stats.

“I’m guessing that the number of transactions that have actually been done through bitcoin are vanishingly small,” said Ogmundson.

A call to the Office of the Superintendent of Real Estate turned up no stats or tracking either. They referred us back to the Real Estate Council of BC.

“It is still pretty new,” said Donais. “It hasn’t evolved yet to make it mainstream. I think we will see this all the time going forward but I think we are a couple years early right now.”

Donais has a realtor so is planning on requiring the buyer to pay the deposit in cash. He would pay his realtor’s commission out of that cash and collect the remainder in Bitcoin.

While all the logistics of using Bitcoin to buy a house are still being smoothed out, the Canadian Revenue Agency (CRA) is responding to the changes.

“In an increasingly interconnected world, the Canada Revenue Agency (CRA) is committed to adapting its administration to keep pace with evolving global services and products,” said a representative for CRA.

When asked if it is legal to sell your house for Bitcoin, Patrick Samson, media relations for Canadian Revenue Agency said, “Technically, you can sell your house for anything you want. You can sell it for three cows. You can sell it for a TV.” But the CRA wants sellers to know that when using Bitcoin, tax rules apply. Sellers accepting Bitcoin are still required to declare capital gains from the sale of a house.

Another layer of complexity in accepting Bitcoin as payment for real estate, is the volatile nature of the digital currency. The amount of bitcoin one would receive for their property is dependant on the market value of bitcoin on the day of closing. With the swings in the currency’s value, that could mean a fluctuation of thousands of dollars on a multi-million dollar property.

“It’s just like trading stocks with a lot more volatility. It’s 24/7. It never sleeps. It’s volatile but I think I can mitigate some of those risks by having a good understanding of the market,” said Donais.

While using cryptocurrency to buy a house is new territory in B.C., bitcoin is no longer a fringe activity. During yesterday’s (Jan.10) 24-hour period, Donais said there was over $17 billion dollars (US) of trading volume for bitcoin alone.

The Canadian government doesn’t recognize Bitcoin as an official currency, but it is legal to use. It can be traded online using exchanges such as QuadrigaCX or Coinsquare . There are also a few Bitcoin ATMs around Victoria.

If using Bitcoin in the sale of a house or property, seek professional tax and legal advice.

Additonal information from Canadian Revenue Agency:

The CRA’s general views on digital currency can be found here.

Digital currency can be bought or sold like a commodity. Any resulting gains or losses could be taxable income or capital for the taxpayer. When digital currency is used to pay for goods or services, the rules for barter transactions apply.

Additional information on cryptocurrencies, including information explaining that digital currencies such as Bitcoin are not legal tender in Canada, can be found here.

Additional information on capital gains regarding real estate can be found here.


 

[email protected]

Follow us on Instagram
Like us on Facebook and follow us on Twitter.

Just Posted

Abbotsford schools get health and safety award for third year running

District gets recognition for training in crisis intervention, new violent incident reporting system

Fleeing driver picks fight with Chilliwack police dog, loses

Good dog ‘Griff’ also locates large quantity of what police believe to be crystal meth in Abbotsford

UPDATE: Heavy rainfall, strong winds in forecast for Lower Mainland

Heavy rains, snow expected till Friday morning

Abbotsford schools shift consent policy for McCreary health study

School board votes unanimously in favour of stricter parental consent policy for survey participation

Your daily commute and weather forecast: Dec. 13, 2018

Heavy congestion in Abbotsford, Langley, Surrey and past the Port Mann. Rainfall warning in effect

Cannabis gift ideas for this holiday season

Put the green in happy holidays, now that cannabis is legal in Canada

Coal power in Canada must disappear by the end of 2029, new regulations say

Canada has significantly cut its dependence on coal largely due to the closure of all coal plants in Ontario.

‘Naive approach’ to China at fault in Meng mess: Scheer

Conservative Leader Andrew Scheer called on the Trudeau government to “unequivocally denounce any type of repercussions to Canadians on foreign soil.”

Omar Khadr ‘a model of compliance,’ wants changes to bail conditions: lawyer

Former Guantanamo Bay detainee Omar Khadr is back in court today to seek changes to bail conditions.

B.C. businesses evacuated due to emailed bomb threat, also received in U.S.

Penticton and Comox Valley businesses evacuated Thursday morning

B.C. man linked to human remains probe gets absolute discharge on unrelated mischief count

Curtis Sagmoen was in Vernon Law Courts Dec. 13 for a mischief trial

Supreme Court upholds Canada’s right to reargue facts in assisted-dying case

Julia Lamb and the B.C. Civil Liberties Association are spearheading a challenge of the law

B.C. company facing several charges in 2017 chicken abuse case

CFIA investigation leads to 38 charges against Elite Farm Services and Ontario-based Sofina Foods

RCMP seize meth, drug-making equipment in large Lower Mainland drug bust

Surrey RCMP believes the ‘significant’ criminal enterprise has ties to the regional gang conflict

Most Read