When she unexpectedly ran out of cash during a trip to Cuba, Kristin Smith knew her options for accessing more funds were limited. Without the ability to use a credit card or pull money from her U.S. bank account, Smith, an agent with Dave Perry-Miller Real Estate in Dallas, was told to call a contact in the U.S. who could transfer money to her via Western Union. Smith called her mother, who was immediately concerned. “I’m asking for money in Cuba,” Smith told attendees Saturday during a session at NAR NXT, The REALTOR® Experience in Orlando, Fla. “[My mom is] asking, ‘Are you being held captive? Are you safe? Is this a ransom?’”
While the situation was eventually rectified, Smith found herself analyzing all the barriers she faced on the trip—which aren’t all that different from barriers when moving money around on the traditional market, she said. “What crypto is going to do is remove those barriers,” Smith posited. She offered a primer on the basic terminology related to cryptocurrency and its potential applications for real estate.
Important Terms in the Cryptocurrency World
- Cryptocurrency “is a digital currency in which transactions are verified and records are maintained by a decentralized system,” Smith said. The most commonly used forms of cryptocurrency are bitcoin and ethereum.
- Blockchain is the technology that enables cryptocurrency, acting as a shared, immutable ledger where you can record anything that is verifiable, including the title of a house.
- Within cryptocurrency, fungible tokens are interchangeable and identical, while non-fungible tokens each have a unique value. All bitcoins across the world have the same value, eds, are unique in nature and value.
Potential Cryptocurrency Applications in Real Estate
While cryptocurrency transactions in the real estate profession remain relatively uncommon, 12% of millennial home buyers sold cryptocurrency to fund their down payments in 2021, according to Redfin data. That stat underscores how popular and accessible cryptocurrency is with younger generations, Smith said.
A bigger opportunity could reside in putting title records, deeds and property surveys on the blockchain. Today’s county records are not all that different from blockchain, Smith said. Each title is recorded with the county, and when the title is sold, the county verifies and records that exchange. By adding title records to the blockchain, each record (or block) would be verified on the blockchain every ten minutes, said Smith. This could greatly speed up the time it takes to accurately verify title records and finalize transactions.
Smith predicts that over the next five years, REALTORS® will begin to see “double reporting,” as titles are recorded both with the county and on the blockchain. “I think the county [records] will slowly phase out because they’ll become a part of the blockchain,” she said.
Weighing the Volatility and Utility of Cryptocurrency
Smith did note that it’s “not the most fun to speak on crypto when the market is tanking,” referencing the collapse of FTX last week. FTX was one of the world’s largest cryptocurrency exchanges until it filed for bankruptcy. Between its downfall and the volatility of the crypto market in general—bitcoin has traded at between $16,000 and $67,000 in the last year—many wonder if it’s wise for the real estate industry to normalize and advocate for cryptocurrency.
Smith, who is the chair of a National Association of REALTORS® presidential advisory group studying the impact of digital money in real estate, agrees that more information and guidance is needed. Her PAG is recommending the formation of a full NAR committee to look into cryptocurrency. “We should probably have a ‘decentralized finance’ committee,” Smith said.
The Future of Cryptocurrency in Real Estate
Until such a committee is created, Smith recommended that real estate pros use their best judgment when considering cryptocurrency investments or exchanges. “The number one thing to ask is: What is the utility of this? Does this actually do something?”This could help REALTORS® differentiate between an NFT, which Smith said has a more limited application and therefore more limited value, and the application for title and blockchain, which could fundamentally alter the title and real estate industries. “Why does a home transaction take thirty days? It’s the title search. If the title was on blockchain, transactions could be instant. This is your money; you should have it now,” Smith said.