New house on the block(chain)

July 22, 2021 | Wayne Logan, John-David D’Souza, Alissa Ricioppo, Kira Lagadin, D. Josiah Allison


Would you trade your home for a work of art? An art critic might consider it. But what if it wasn’t art you were trading your home for, but Bitcoin? Like artwork, Bitcoin’s value is largely dependent on the value that people assign to it. However, unlike a piece of artwork, Bitcoin’s value fluctuates dramatically on a weekly, and even daily, basis. While this uncertainty may deter the average home seller or buyer, there are brave individuals who have already begun to buy and sell homes in exchange for Bitcoin.

So how does it work?

Theoretically, the process is simple. If you have a seller and buyer who are willing to exchange a home for Bitcoin, all you have to do is transfer Bitcoin from the buyer’s digital wallet to the seller’s.

The complexity of the process comes from the fact that cryptocurrency in real estate is largely uncharted legal territory. Technology is developing more quickly than the regulations governing it, which can make dealing in cryptocurrency riskier than engaging in more traditional methods of conducting business. At the same time, government and regulators are passing new legislation to attempt to keep up with this evolving sector, creating unpredictable challenges. This is not to say these transactions cannot be done – purchasing real estate for Bitcoin is entirely legal in Canada – merely that they require an experienced touch to navigate them successfully.

Customized Purchase and Sale Agreement

Standard purchase and sale agreements are not designed with Bitcoin in mind, so their terms run the risk of being incomplete or inapplicable to a transaction involving Bitcoin. Instead, you will need a customized agreement which covers the unique legal issues associated with using cryptocurrency to purchase a home. For example, typical agreements will reference an exchange of the home for the “purchase price.” It is standard for this “purchase price” to be in Canadian dollars (or perhaps another fiat currency, such as United States dollars). Such terms will be inapplicable to a transaction conducted in cryptocurrency. Other unique terms will apply to transactions involving Bitcoin which are discussed later in this article.

KYC/AML Checks

In a typical real estate transaction, a bank will run Know Your Customer (KYC) checks and Anti-Money Laundering (AML) checks on the buyer to ensure they are not on any sanctioned lists. These checks are mandated under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.[1] However, there is rarely a bank involved in transactions that involve Bitcoin as the only currency. Instead, it falls to the seller to ensure the safety of the transaction by performing these checks themselves, or to ensure that the Bitcoin to be transferred in the transaction is stored on a crypto platform that requires and implements these checks. Penalties in Canada for failing to report suspected money laundering or terrorist financing activities are severe, and may warrant a fine up to $500,000 or six months of prison time for a first offence.[2] It is therefore crucial that these checks are performed properly if a real estate deal is conducted with Bitcoin.

Escrow and Trusts

Agreements of purchase and sale of real estate are usually secured by a buyer’s deposit. This deposit is held in a trust account by a lawyer or real estate agent in escrow or trust until the deal is signed. Similarly, on closing day, the purchase proceeds are typically transferred a lawyer in trust to be released only upon confirmation by both parties that the conditions on the sale have been met or waived by the applicable party. Trust and escrow accounts protect the deposit and purchase price in case the deal collapses, and provide accountability and peace of mind to both parties. In Canada, cryptocurrencies may not be allowed to be held in trust using traditional mechanisms. This adds a layer of complication to any real estate transaction involving Bitcoin, and could potentially create additional risk for a buyer or seller should the deal collapse.

New York State has solved this problem by requiring anyone who holds cryptocurrency on behalf of another person to obtain a BitLicense.[3] These BitLicenses can then theoretically permit regulated trustees to hold trust or escrow cryptocurrency in the case of a real estate deal. BitLicenses do not exist in Canada yet, but this may be something that will develop in the future as cryptocurrency transactions become commonplace.

There is also an unregulated and evolving Bitcoin escrow service provider market, where third parties offer escrow services for Bitcoin in contractual transactions. This typically requires the Bitcoin to be transferred to the third-party escrow provider to be held in escrow until the agreed upon contractual terms are met. If and when the contractual terms are met, the Bitcoin is transferred to one of the contractual parties pursuant to the terms of the escrow agreement. This space is currently operated by start-ups and entrepreneurs rather than traditional escrow providers (such as real estate brokerages, trust companies and law firms). As such, it is important to carefully review the history and reputation of such providers before using their services. As Bitcoin transactions move into the mainstream, we anticipate that more traditional escrow providers will begin offering escrow services for these types of assets.


Generally, where Bitcoin or another digital currency is used to buy property or services, the Canada Revenue Agency takes the position that the parties have entered into a barter transaction. The income tax and sales tax treatment to both parties to a barter transaction involving digital currencies is an evolving area and outside the scope of this article. Both parties to the transaction should discuss the tax implications with their tax advisors.

Price Volatility

Cryptocurrency market volatility can put both parties to a real estate deal at risk. There may be a significant change in the currency’s value between the date the parties sign off on their agreement and the date the purchase is executed. This volatility means that one party may receive a windfall, while the other regrets the transaction.

There are a number of possible solutions and techniques that can be used to reduce or allocate the risk of volatility between the buyer and seller on an agreed upon basis. As such, it is important that as a buyer or seller you discuss this issue with your professional advisors. All potential solutions come with their own risks and benefits, but regardless of which solution the parties choose, the agreement for purchase and sale must be clear to reflect the intentions of the parties and add certainty to the transaction.


If you are planning to convert the Bitcoin earned from selling real estate to cash, you need to think ahead before going forward with the sale. Recent changes in the regulation of crypto asset trading platforms (the primary provider of liquidity in crypto-to-fiat transactions) may make it difficult to do so. The new regulations require these platforms to register as dealers under securities laws, and to comply with certain securities laws in Canada.[4] These platforms have also recently been required to register under the PCMLTFA as money service businesses and report to FINTRAC in accordance with the PCMLTFA.[5]

It is important to assess the evolving regulatory requirements for transferring cryptocurrency on crypto exchange platforms, including any audit trail requirements. Failure to do so could leave you facing difficulties in liquidating the Bitcoin received in the transaction.

So Why Buy with Bitcoin?

The reason most cryptocurrency enthusiasts choose to buy or sell real estate with Bitcoin is for one reason: because they can. The practice is legal, and advertising acceptance of Bitcoin often brings extra attention and different types of customers to a property listing.[6]

Other Trends in Blockchain and Real Estate

If the above reasons leave you doubting the longevity of cryptocurrency’s influence on real estate, you may still want to keep your eye on the fascinating confluence of blockchain technology and real estate. There are two up-and-coming trends occurring in the market that might make blockchain-driven real estate transactions more commonplace in the future.

Smart Contracts

Smart contracts are not directly linked to Bitcoin, but they exist in the same blockchain-sphere, meaning they operate on similar technology. These contracts are programmed to automatically execute without additional human action to support the transaction.[7] If a smart contract is used to purchase real estate, it may be programmed to automatically transfer the price of the purchased real estate from the buyer to the seller on a specific date or upon the completion of certain conditions precedent.[8] Distributed leger technology then ensures that the transaction is both publically transparent and protected from hacking. This can theoretically save both parties time and money dealing with banks and lawyers to complete a property sale, and could also be implemented to address the escrow issues discussed above.

Real Estate Tokenization

Another trend in the blockchain world that may inspire commercial property purchases driven by blockchain technology is the tokenization of real estate. Investing in commercial real estate is typically reserved for the wealthy, but tokenization allows any individual to purchase one small share of a larger property.[9] Instead of selling an office tower for $10 million, a building may be tokenized into 1,000 shares worth $10,000 each. These tokens are then recorded publically and verified on the blockchain.[10] This puts real estate investing within reach for more people, and may give project financiers easier access to the funds they need to execute a build.[11]

The Bottom Line

The use of Bitcoin in real estate transactions raises unique issues regarding contractual terms, tax implications and other legal and practical considerations. While the overlap between cryptocurrency and real estate is currently in its early stages, it is trending towards the conventional. You could see a Bitcoin listing on your block sooner than you might think.

***Miller Thomson employs experienced lawyers who can help you navigate complex cryptocurrency and real estate matters.***

[1] Proceeds of Crime (Money Laundering) and Terrorist Financing Act, S.C. 2000, c 17  [PCMLTFA].

[2] Ibid at s. 75(1)(a)(i).

[3] New York Government – Department of Financial Services, Virtual Currency Businesses, BitLicense FAQs, online.

[4] See Joint Canadian Securities Administrators/Investment Industry Regulatory Organization of Canada Staff Notice 21-329 – Guidance for Crypto-Asset Trading Platforms: Compliance with Regulatory Requirements, online.

[5] Supra note 1 at s. 5(h).

[6] Diana Olick, “Real Estate Catches on to the Crypto Craze as People Buy Homes with Bitcoin”, CNBC (7 April 2021), Video.

[7]How Smart Contracts Are Evolving Transactions For Real Estate Companies”,  Leax Foundation – Leaxcoin (LEAX) (18 March 2020), online.

[8] Ibid.

[9] David Israelson, “How Blockchain is Shaking Up Commercial Real Estate”, The Globe and Mail (23 March 2021), online.

[10] Ibid.

[11] Ibid.


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