APRIL 03, 2022 | Issue 09
ON APRIL FOOL'S DAY, WHO IS THE BIGGER FOOL – THE FOOLER OR FOOLEE?
I couldn't resist sending out an April Fool's Day video message on Friday, April 1st. Immediately after hitting "send," I received about a dozen email replies...
"LMAO." "You had me until the Will Smith NFT." "I am so gullible." "Good one!" "Well played!" "I was about to invest all my money in BTC!" "Wait, was that a joke?!" "Realogy did that?"
I came up with several stories that were on the edge of absurdity. However, we're living in such extreme times and the crypto world is so bizarre, I barely crossed the line from real news to April Fool's Day news.
You be the judge. Watch the 87- second video I sent out on April 1st. Did I fool you? Let me know.
In this issue, I discuss the real events that occurred this past week. If you are enjoying Crypto News for Realtors, please share it with your colleagues.
Have a great week and stay crypto curious!
Rich Hopen
richard.hopen@compass.com
908.917.7926
PS. You can find all CNR newsletters here.
CRYPTO & REAL ESTATE
▸ Taxes & Crypto – IRS Wants Everyone On Record
The very first question on a 1040 tax form asks taxpayers if they sold crypto. Anyone who purchased a home with crypto in 2021 should pay close attention to the question.
This week, I spoke with several real estate agents, crypto mortgage lenders, and title professionals about their experience with crypto real estate transactions. I was a bit alarmed by what I heard.
Several didn't understand how crypto is taxed. While it's appropriate for real estate agents to remind clients to seek tax advice from a tax professional, real estate agents should understand some tax fundamentals.
It is crystal clear that the IRS views cryptocurrency as property. If a buyer either sells their crypto to buy a house or pays crypto directly to a seller, this triggers a taxable event.
Think of the crypto as stock. If someone sold shares of Apple stock to pay for a house, they would have a capital gain or loss on the stock sale. The same process applies to crypto.
If you are working with a buyer or seller and crypto is used in the purchase, I suggest reading these IRS FAQs on crypto.
▸ Are Crypto Scammers Targeting Real Estate Agents?
An interested buyer reached out to a colleague in the CØMPASS Boston office, Colleen Kelly, via whatsapp. The buyer wanted to purchase a $5M to $8M home in Boston and wanted to pay in crypto. Kelly asked for proof of funds and was provided with a screenshot of a crypto wallet showing a crypto balance over $30M. Kelly reached out to me and over the course of a week, we tried to discern if the buyer was real and the best way to handle the crypto payment.
Kelly was cynical. The buyer was unwilling to have a phone call, avoided email, and only communicated by whatsapp.
The buyer was more interested in flaunting his crypto trading skills than in the houses that Kelly presented to him.
A turning point was when the buyer texted Kelly and offered to teach her how to make money with crypto. He urged her to download an app and let him guide her on investing.
When she said they could have that discussion after they closed on a house, the buyer resisted, became indignant and used vulgar language in his text messages.
Kelly notified the authorities.
In hindsight, there were warning signs that the buyer wasn't legitimate. In one text, he mentioned the Houston market instead of Boston. When providing a home address, he provided the address for a high-end condo building in NYC, but didn't provide a unit address.
Apparently, there are other scammers claiming to be serious homebuyers with crypto.
A Miami agent who has a luxury building listing said a lot of bogus buyers offer to pay in crypto.
Of course that doesn't mean all crypto buyers are scammers. Be sure to vet them by asking the right questions and seeking appropriate proof of funds.
If a crypto buyer contacts you and you would like my guidance, reach out to me. I'm happy to help.
CRYPTO NEWS
▸ Ukraine Sold NFTs, Raised Over $600,000
An NFT collection of art, photographs, and video documenting the Russian invasion of Ukraine is being sold to rebuild museums, theaters, and other cultural institutions that have been destroyed.
The museum will also sell some of its artwork to those who hold a Museum of War NFT.
▸ Citibank Issues Report on Metaverse
Citibank projects that by 2030, there will be up to five billion users and a metaverse economy between $8 trillion and $13 trillion.
The report said the metaverse would be open, community-owned and self-governed. Citibank expects cryptocurrency will dominate the economy along with central bank digital currencies and stablecoins (crypto pegged to fiat currency).
▸ Michael Saylor's MicroStrategy Buys More Bitcoin
MicroStrategy's CEO and bitcoin evangelist, Michael Saylor, borrowed $205 million against MicroStrategy's existing bitcoin holdings to purchase more bitcoin. This brings MicroStrategy's bitcoin balance to about $6 billion.
Saylor told Bloomberg that the market isn't ready to issue bitcoin-backed bonds that could be sold like mortgage-backed securities.
▸ SEC Issues Guidance to Crypto Firms
Crypto owners have a private cryptographic key to give them access to their funds. Some owners keep their keys in their crypto wallets (usually, a "cold wallet" that is not connected to the internet). Others keep their private key on a crypto exchange.
The SEC may promulgate rules that would apply accounting standards to digital assets. It would require crypto trading platforms to assume the liability of holding their customers' assets.
CRYPTO CLASS - Proof-of-Stake
Since there is no central authority ensuring the integrity of a blockchain, a consensus mechanism is used to check the existing data and add new data.
The Bitcoin blockchain uses the Proof-of-Work mechanism. Proof-of-work sets up a competition among Bitcoin miners to solve a mathematical problem that requires using a massive amount of computing power. This has a significant environmental impact.
An alternative consensus mechanism is proof-of-stake. "Validators" will offer their coins as collateral for the opportunity to validate blocks on a blockchain. This is referred to as "staking." It only uses a small fraction of energy compared to the proof-of-work mechanism. The Ethereum blockchain is moving from proof-of-work to proof-of-stake. When it does, a validator will need to "stake" 32 ETH (about $110,000 at today's price). Validators are selected at random to validate the block. When enough validators verify the block is accurate, the block is closed.
INFLUENCERS - People to follow
Founders of Gemini, a crypto exchange, the Winklevoss twins used their settlement money from their lawsuit against Facebook and became investors in an early crypto exchange, BitInstant. Unlike other early crypto pioneers who had strong libertarian beliefs, the Winklevoss twins believed that it was imperative to comply with governmental regulations.
In 2014, they launched Gemini. According to Bloomberg, Gemini is valued at $7.1 billion. Gemini and Coinbase are rival exchanges.
RESOURCES – Books, websites, podcasts, articles
The book, The Age of Crypto Currency by Wall Street Journal reporters Paul Vigna and Michael J Casey, dives deep into the crypto technology, ideology, and its impact. The authors explain complex topics, provide context, and share entertaining stories about the people who are shaping the crypto world. Although it was written in 2016, the book provides a great foundation.
CRYPTO WORDS – Airdrop
An airdrop involves sending coins or tokens to a wallet address to promote a virtual currency project. The coins are typically sent in return for a small promotional activity such as retweeting a post. Airdrops help increase ownership and spread awareness.
OH, ONE MORE THING – David Spade on real estate and bitcoin, the metaverse, and NFTs.https://www.instagram.com/reel/CbqdTvrDpae/
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