$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.


 

keri.coles@oakbaynews.com

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

Just Posted

Big Brothers Big Sisters looking for more in-school mentors

“I think you can learn a lot from each other” says high school mentor

COLUMNIST: Good neighbours

David Zirnhelt’s weekly column Ranch Musings

Wilkinson meets with Liberals in the Cariboo

BC Liberal leadership candidate Andrew Wilkinson is in Williams Lake Friday

Beat the winter blahs with a travel and dessert night

Vietnam and Singapore next installment in the popular travelogue series to take place Jan. 24

Cariboo Orthotics puts best foot forward

Lakecity business open since Oct. 1

Cougar kitten rescued near Williams Lake

Conservation Officers find home for young kitten after mother struck by vehicle

RCMP nail sex toy thief

Shop owner plays a role in arrest

Ice-cream-eating bear draws controversy

An Alberta Wildlife Park posted a video this week of one of their bears going through a Dairy Queen drive-through

Fernie, RCMP go to court over city log books in fatal ammonia leak probe

Log books center stage in clashing of investigations between the city and RCMP

B.C.’s biggest pot plant planned for Oliver

Co-founder Tony Holler said the 700,000 sq. ft. facility would produce 100,000 kg of pot per year

High-end whisky seized in B.C. bar raids

Raids end in seizures at Victoria, Nanaimo and Vancouver whisky joints

Double-doubles and demonstrations: Employees rally outside Tim Hortons

Protests held in response to Ontario franchise owners cutting employee benefits and breaks

Train derails in Northwest B.C.

CN reports no injuries or dangerous goods involved after coal train derailment.

Las Vegas shooter acted alone, exact motive still undetermined: Sheriff

Stephen Paddock was behind the gunfire that killed 58 people including two Canadians

Most Read