Cryptocurrency is opening new doors in the commercial real estate industry, changing the way commercial properties are sold and transferred. Whether this promises a better future is up for debate. But one thing is for sure; it’s becoming increasingly possible to influence existing trends, challenges and security threats.
If you’re considering using crypto in a commercial real estate transaction, contact our real estate attorney team today. Our experts will ensure your transaction still meets all necessary legal requirements while protecting you from liability or security risks.
What Is Cryptocurrency in Commercial Real Estate?
Cryptocurrency is a digital or virtual currency or asset. Crypto doesn’t exist in a physical form. Instead, it uses advanced blockchain technology for security. Using a ledger system that retains a history of transactions, investors have improved security.
Using crypto in real estate transactions can allow for various benefits, including high-speed transfers, low transfer costs and no financial institution involvement.
So, let’s look at how using a digital currency in real estate business is set to impact the industry:
New Ways to Trade Real Estate Assets
Cryptocurrencies are predicted to make online commercial real estate asset trades easier, smoother and safer. Properties can be tokenized and exchanged for a fiat currency. Forbes says, “this is just the tip of the iceberg when it comes to the future of partnerships and investments on the blockchain.”
One of the biggest draws of crypto in the commercial real estate industry is the speed of transactions. Currently, investors have to travel a lot. Physical presence is required and this slows down the process significantly.
Blockchain technology could end that need entirely. With added security, investors can sign commercial contracts and transfer funds from anywhere in the world at any time.
More so, international transactions will become cheaper and easier. Instead of waiting days for funds to transfer currencies and for banks to process the payments, transactions can occur instantly.
This comes as good news to the US commercial real estate industry in particular. Since 2019, international investors have been slowing down their rate of commercial acquisitions in the U.S. due to the risks of currency exchange rates.
Crypto will bypass this risk entirely. Investors in low-value currency countries can enter a wider range of markets.
Making Commercial Property Ownership More Accessible
In the current world, most business owners that don’t have large funds upfront tend to struggle to invest in commercial real estate. However, the use of cryptocurrency in commercial real estate makes it possible to buy and sell properties in fractions.
Investing in fractions lowers the barriers, so people can invest with smaller budgets. They’re also no longer restricted by location – mitigating the risks of commercial real estate investments.
Peer-to-Peer Transactions Can Become Common
As blockchain is decentralized, secure and transparent, peer-to-peer transactions could rise in popularity. With no need to rely on brokers and banks, investors can skip intermediaries and their associated fees.
This again will lower the barriers to new types of investors. However, it is critical to consult a real estate lawyer. As secure as cryptocurrency transactions are, property sales are still lined with important legal matters that can leave you liable if not properly addressed.
Improved Search Procedures
Searching and leasing procedures have been long outdated and criticized. But by using cryptocurrency in commercial real estate, we could be set for a modernized and streamlined system.
By using blockchain-based Multiple Listing Services (MLS), the industry gains a centralized system with data from all listings. Any data errors can be quickly removed, as brokers, property owners and tenants gain more control over listings. The result? Improved reliability and trust.
No More Third Parties
The commercial real estate industry has long been swamped by third-party involvement.
Escrow companies may protect the interests of all parties involved but are often slow, expensive and frustrating.
With blockchain technology, the need for escrow becomes a thing of the past, making commercial real estate transactions cheaper and faster.
How? Because every transaction is public and recorded in real-time. They cannot be changed or interfered with. Automation is rapid and accessible from any location in the world.
While cryptocurrency is very popular for private transactions, public crypto transactions are all the rage now (and also cheaper). This is the opposite to the usually highly confidential transactions of the existing real estate market.
This is set to have a big impact on the commercial real estate sector, as buyers will be able to make informed decisions by seeing trends and market directions. Existing dealers and new investors can quickly learn about ins and outs thanks to this increased transparency.
New Investment Vehicles
Cryptocurrency in commercial real estate is also set to unlock interesting investment vehicles. For decades, stock traders have benefited from stock trades, bonds and commodities.
But with crypto, there is the chance for commercial real estate trades, too. Experts predict that commercial real estate assets could be liquified and made into tradable tokens. Here in Florida, we’ve already seen residential real estate properties sold as NFTs.
This may make property trades much easier and allow sellers to sell off their real estate assets in small portions to multiple buyers, rather than one single wealthy buyer.
Read our guide on “How to Buy Real Estate With Cryptocurrency in Florida”
The Potential Risks of Cryptocurrency in Commercial Real Estate
Naturally, using blockchain technology in commercial real estate comes with risks. For all its impressive security and speed benefits, a new form of financial hacking theft is on the rise. Institutions have already become victims to these attacks, including Dragon Ex 10 (Singapore-based exchange). Unlike fiscal currencies, cryptocurrencies are invisible and vulnerable to hackers.
Sellers should also be aware that with a lack of regulation, fraud is not out of the question. Money laundering is rife in the crypto world. Anyone considering using crypto in commercial real estate should take additional precautions to avoid these dangers.
However, the hope is that with the growth and popularity of blockchain, the system will gain insurance coverage and increased regulatory protection.
Contact a Real Estate Lawyer in Florida for Cryptocurrency Commercial Real Estate
If you need legal assistance with cryptocurrency-related commercial real estate transactions in Florida or real estate ownership decisions, then our Florida real estate lawyers can help.
Whether you’ve received cryptocurrency offers or need support closing a sale, you can receive a free consultation.
Our St Petersburg and Riverview real estate attorneys at Battaglia, Ross, Dicus & McQuaid, P.A. will review your circumstances and ensure your transaction goes smoothly.
Contact us today to schedule a free consultation.