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What’s Bitcoin, Anyway?

Have you heard of bitcoin? Do you know what it is, and whether or not you should use it? If so, you are not alone.

Bitcoin is a new cryptocurrency or digital money that made its debut in 2009 by…who knows? The originator of the bitcoin uses the alias Satoshi Nakamoto. Bitcoin bypasses a typical bank transaction, and you can use bitcoins to book hotels, shop for furniture, or buy household goods. In fact, right now more than 100,000 merchants accept bitcoin as a legitimate form of currency.

Compared to traditional currency, with bitcoin there are no third parties, authorities or central government that regulates transactions. It is an attractive currency if you are doing an international transaction, as payments are easy and cheap, with no credit card or bank fees. Bitcoin users like that they can have electronic transfers or buy goods and do so anonymously, without government regulation. In other words, there is no paper trail to trace the person involved in the transaction.

Some investors have bought bitcoin, thinking it will rise in value. It has had a rocky road. It hit its peak on late 2017, but has since been on a roller coaster ride. Bitcoin is used most frequently in China and South Korea, but those countries seem to be leaning toward tightening the rules that concern bitcoin trading.

Can I Buy a Home using Bitcoin?

Still, bitcoin for consumer use is gaining in popularity. Can you finance a home using bitcoin? Maybe. If the home seller is comfortable using bitcoin as currency, then there are typically no issues. It is an extremely new process. The first home was sold in Texas via bitcoin in 2017. The challenge was to figure out which company would do an exchange that large. The transaction was completed with BitPay, which turned the bitcoin into dollars. If you are interested in bitcoin, there are sites like Open Listings which make it easy to find properties you can purchase with bitcoin.

However, the idea of using virtual currency to purchase real estate is very new, and there is still a great deal of nervousness in the industry. Traditional lenders want reliability and stability in a home buyer’s ability to pay, and bitcoin is a new player in the financial market, with a recent volatile history, so lenders are typically hesitant about this more speculative form of payment. Even if you can find a seller who is willing to deal with you in bitcoin, you might not be able to find title insurance and escrow companies that are as well.

Bottom line: bitcoin has not been widely adapted as cryptocurrency for a home purchase. But technology, and the use of it, grows quickly, so this may change in lenders’ perceptions of bitcoin in the coming months and years. If you find a lender who has had positive experiences with bitcoin you may have success. Most lenders and agents continue to be skeptical of the cryptocurrency.

At Partners Direct Insurance, we pride ourselves on helping each client with his/her individual insurance needs and finding solutions that work. Contact us to help you!