How To Buy a House With Bitcoin in Canada

Bitcoin has been all over the news in the past few months, from CNBC to Motley Fool. As a Toronto Real Estate Agent, in the past few weeks I came across this question that some buyers have about how to buy a house with bitcoin in Canada. I wanted to write this article to explain if you can buy a house with bitcoin and what are the things to consider buying a house with bitcoin in Canada.

How to buy a house with Bitcoin in Canada

First let’s answer the question: Can you buy a house with Bitcoin?

The short answer is Yes, but the long answer needs more clarification.

In a typical agreement of purchase and sale in Ontario, the rights to the real property (whether it is a freehold or a condominium or a co-op etc) can be transferred from the current holder (seller) to the buyer in exchange for the Purchase Price. Purchase price in the Agreement of Purchase and sale, Standard OREA APS versions in Ontario, by default is Canadian Dollar.

But can it be Bitcoin instead? Let’s look a basic definition:

Purchase Price in real estate means the consideration for which The Real Property may be acquired. By default in the standard CREA or OREA Agreement of Purchase and Sales, the Purchase price is CAD.

Based on what we discussed, if you want to use the standard forms of APS from Canadian real estate associations you can not pay for a house with Bitcoin. In this case you’d need a customized and specifically drafted Agreement of Purchase and Sale

Deposit Holder and Trust Accounts

If you purchase a real property (a house or a Condo, etc. ) the deposit that you pay for securing the Agreement of Purchase and Sale, will normally be held in the Listing Brokerage’s Trust account. Of course unless otherwise agreed upon while drafting the agreement. So let’s go with the assumption that the deposit will be held in Trust by the listing brokerage.

The regulations around the Trust account and holding the deposit has been set by Real Estate Council of Ontario (RECO) under REBBA (soon to be replaced by TRESA)*.

REBBA Act 27. (1) says that every brokerage shall maintain in Ontario an account designated as a trust account in A. a bank B. a loan or trust corporation C. a corporation registered under Loan and Trust Corporations Act D. a credit union.

So as you see you can not use the standard Agreement forms from CREA or OREA to broker a deal in Bitcoin! Instead you’d have to draft a curated Agreement, and also based on the above, the Listing Brokerage can not be the deposit Holder when the consideration of the real property is Bitcoin. Because none of the above authorized Trust Holders under the REBBA Act don’t offer Bitcoin accounts.

The Solution is to solve the Deposit issue in the curated APS by assigning a different Trust Holder. The details to that is beyond this article so if you need more info about this you can contact us.

Taxes

One thing that is interesting is the tax implication on purchasing a home with Bitcoin.

First let’s get the disclaimer out of the way! This is not financial or tax advice. For any advice you must consult your accountant or financial advisor. Now that it’s out of the wy let’s look at the misconceptions.

It is wrong if you think you can purchase a house with Bitcoin and not to pay taxes on it. If you buy anything with Bitcoin, you’ll have to pay the taxes one way or the other.

CRA clearly specifies that you MUST report business income or capital gains from the disposition of your cryptocurrency. You might say well if I don’t sell my Bitcoin and just turn it to a real property, is it still considered disposition? The answer is YES! This is how the CRA has worded it:

What is a disposition of a Cryptocurrency (i.e. Bitcoin ) ?

This refers to the way you get rid of something, such as by giving, selling or transferring it. Thus there could be tax consequences when you do any of the following:

1. sell or gift a cryptocurrency
2. trade or exchange it
3. convert cryptocurrency to government-issued currency ( CAD )
4. Use Cryptocurrency (i.e. Bitcoin) to buy goods and services (THIS IS WHERE IT NEEDS ATTENTION)

Based on what we just read, using a cryptocurrency ( Bitcoin ) to buy Goods or Services is also taxable in Canada. Whether it is considered Capital Gain or Business income is something that your accountant must tell you about!

Based on what we just discussed, using Bitcoin as a consideration in exchange for a real property is taxable!

Literal version: Using Bitcoin to buy a home in Canada is taxable!

The Biggest Challenge

When it comes to buying a house with Bitcoin, the biggest challenge is the valuation itself! Bitcoin’s price based on a quick search on Google can be seen to be fluctuating sometimes over 10% in just a single day! That also can translate into a huge price difference from the day that you sign the agreement and the closing date of the contract!

For example, you buy a house or a condo with Bitcoin at the end of January and your closing is End of March. What if the price of Bitcoin changes by 50% till then?

If Bitcoin’s price drops between the time you sign the agreement till the time that you close the deal, any of the parties might be unhappy!

If the Bitcoin’s price drops by the closing date, then the seller would be unhappy, and if the bitcoin price goes up the buyer will be unhappy!

There are three solutions to this problem:

1. Fixing the price at the signing of the agreement!
2. Fixing the price on the closing date ( Future’s Price )!
3. Close right away and lease back to the seller for a couple months for them to be able to find a place and move out!

Each one of those methods have its pros and cons. To know about the details and which one I would suggest, you can contact me.

Is It a Good Idea?

The idea of buying a house with bitcoin in Canada has recently become more popular, as people are looking for alternative ways to invest their money. Bitcoin is a digital currency that has seen an increase in value over the past few years, making it an attractive option for those looking to make an investment.

But is it a good idea to buy a house with bitcoin in Canada? The answer is yes and no. Buying a house with bitcoin in Canada is a risky endeavor and should only be done by those with a strong understanding of the cryptocurrency market.

Most Important Things to Consider Before Buying a House with Crypto

There are a few things to consider before taking the plunge, such as the legal implications, the availability of bitcoin-accepting real estate agents, and the level of security offered by the transactions.

The legal implications of buying a house with bitcoin in Canada

The legal implications of buying a house with bitcoin in Canada are still relatively unknown. While some provinces have begun to explore the possibility, there are still no clear regulations in place.

This means that buyers should be extra vigilant when conducting such transactions and should know their rights and obligations.

Find a Reputable Toronto Real Estate Agent

The next step is to find a reputable real estate agent that is willing to accept bitcoin as payment.

Unfortunately, not many real estate agents in Toronto are equipped to handle bitcoin payments, so buyers may have to look further afield.

However, there are a number of real estate agents across Canada that are beginning to accept bitcoin payments, so it is worth investigating.

The Security 

Finally, it is important to consider the level of security offered by the transaction. Bitcoin transactions are based on blockchain technology, which is highly secure and almost impossible to hack.

However, buyers should still take steps to ensure their funds are protected, such as using a reputable wallet service and keeping the private keys to their wallet secure.

Overall, buying a house with bitcoin in Canada is a risky endeavor that should only be attempted by those with a strong understanding of the cryptocurrency market. While there are a few real estate agents that are beginning to accept bitcoin payments, buyers should be extra vigilant when conducting such transactions and should ensure their funds are secure.

Conclusion:

The way that I wrote this article should give you a good insight about the pitfalls and pros of buying a house or a condo with Bitcoin or any cryptocurrency in Canada. If your purpose of purchasing a property is to invest, you might as well look at The Best Places to Invest in Toronto.

The most important thing that you need to consider when paying your house with a Cryptocurrency in Canada is the Taxes. As we reviewed up in this article, any disposition of a cryptocurrency ( Bitcoin in this article ) might be taxable. For that you need to consult your accountant.

* REBBA stands for Real Estate and Business Brokers Act, 2002 (REBBA) which will be replaced by Trust in Real Estate Services Act, 2020 (TRESA 2020).

https://www.reco.on.ca/publicdocs/REBBA%202002.pdf