Investors Are Targeting CRE To Cash Out Their Bitcoin. They Hope Trump Can Help

A cryptocurrency bull run has more than doubled the price of Bitcoin in the last year even before the presidential election was called for Donald Trump, who not only worked to win the vote of digital currency holders but also has his own coin.

With prices high, investors are looking for a smooth process to turn their digital assets into physical investments such as real estate. But navigating a market exit can be challenging when large amounts of cash are moving across platforms that have limited federal guidance or oversight, with high fees and transactions that are frequently delayed by banks. 

Proponents of cryptocurrency are optimistic that Trump’s second term will mark a turning point for the digital currency, which has been viewed with some doubt by the Biden administration. Ahead of Trump’s arrival in the White House, cryptocurrency skeptic and chair of the Securities and Exchange Commission Gary Gensler announced his resignation Thursday to make way for what is expected to be a leader more friendly to digital tokens. 

Despite a reputation for being outside the traditional financial system, most investors today are looking for federal guidelines that standardize some aspects of cryptocurrency, from taxes to transaction records, to replace the current patchwork of uneven enforcement across jurisdictions. They expect Trump will deliver a framework that will push digital currency transactions into the mainstream. 

“It's long overdue that the federal government clarified how this asset is going to be treated,” said David Yermack, a New York University finance professor who teaches a course on cryptocurrency. “What you've seen for many years now is this thing that's come to be known as regulation by enforcement where, without telling you what the law actually is, they just come and sue you.”

Demand to use cryptocurrency has become so prevalent that it’s likely to dethrone artificial intelligence as the National Association of Realtors’ top technology priority next year, said Chris Christensen, the director of technology policy for the agency that represents more than 1.5 million real estate professionals. 

Political demand for cryptocurrency policy reform was on display this election cycle, Christensen said, with more than $131M spent on dozens of races by the largest cryptocurrency super PACs, according to CNN. 

“I was talking with members in California, and they said it this way: We've never seen an issue go from not in the political debate to entirely encompassing the political debate,” Christensen said of cryptocurrency policy. 

The financial industry has long lamented the practice of regulation by enforcement, but crypto exchanges, coin creators and crypto investors say that a lack of federal guidelines makes it especially difficult to ensure they are following all financial rules. 

Just over half the SEC’s regulatory enforcement actions in 2023 involved digital assets of some sort, according to Jonathan Groth, a partner at DGIM Law. Different enforcement actions across different states further muddy the waters, with jurisdictions across the U.S. having different rules and regulations that have been set out through case law. 

“The hope is just that there will be a regulatory framework put into place that is friendly to the crypto markets to allow for growth and to allow for innovation,” said Groth, who is also the mayor of the small Miami village Biscayne Park, which has a population of  3,117.

The latest surge in Bitcoin, and to a lesser extent Ethereum, has been largely devoid of the sort of blockchain-driven ideas that pervaded the pandemic-era price increase, which included a heavy commitment to using the blockchain to do something other than simply be an investment. This manifested in the creation of NFTs, artificially scarce digital objects created using blockchain technology.

The trend was perhaps best encapsulated by Paris Hilton’s appearance on The Tonight Show with Jimmy Fallon to show off her Bored Ape NFT, a digital image held on the Ethereum blockchain that sold for six figures at the height of NFTs’ popularity. The same images sell for around $45K today.

Today’s investors look at cryptocurrency as the investment itself, not as a digital dollar to buy other digital goods with. They do, however, want a smooth way to transition their cryptocurrencies into hard cash and tangible assets such as property, Groth said.

Piper Moretti and James Richardson, founders of Los Angeles-based The Crypto Realty Group, said they noticed an uptick in inquiries that started when the SEC approved Bitcoin-backed exchange-traded funds in October.  

The SEC approval provided some tailwinds to the crypto market, but Trump’s win on Nov. 5, and the subsequent 35% increase in Bitcoin’s value, has spurred another wave of investors looking to buy real estate with their cryptocurrency.

Moretti, who handles most of the brokerage work while Richardson provides technical support as chief technology officer, said her client mix today is split roughly evenly between residential and commercial transactions. 

She has commercial clients who have been acquiring multifamily properties with fewer than five units, but she has seen an uptick in office buyers this year.  

“It's more office-heavy because office space is still, for all intents and purposes, a little cheaper,” she said. Her clients also tell her they’re looking for a place for their own office space, although she said they rarely follow through with a physical space after the deal closes.

The flow of crypto and dollars is largely in one direction. Buyers are coming to Moretti with cryptocurrency, but the sellers are taking cash. The brokerage’s competitive advantage is its ability to facilitate currency exchanges faster, cheaper and more efficiently than if it were done through a traditional exchange platform like Coinbase, Richardson said. 

“Most sellers don't want to deal with crypto. But, if they're getting dollars on the other side, there's really no difference for them,” he said. 

One in nine first-time homebuyers sold some cryptocurrency to help make their down payment by the end of 2021, according to a Redfin report, up from just 4.6% in 2019. The crypto market’s recent surge is leading a new cohort to look to cash out.

NAR’s latest data showed that 26% of recent homebuyers paid cash, a record high, according to Christensen, who said that NAR members were looking for a framework that would allow buyers to reliably use cryptocurrency to do transactions.

“If you can create some guardrails, that gets the industry interested, because we're always open to new liquidity,” Christensen said.

Rules are desperately needed, Groth said. His legal practice has recently begun to focus on handling cryptocurrency and digital assets during insolvency, bankruptcy and loan workouts. There are no federal guidelines for how to handle many situations, and the lack of rules has made it easier for bad actors to create scams, further pushing away institutional capital.

“If you have guidelines — an instructional book in front of you on how your assets are going to be treated by the regulatory agencies — and you can track investors, and how you know you can grow at scale, then it's just going to be that much better than the Wild West,” Groth said.