Burgeoning Bitcoin use in real estate spurs legal questions
Bond New York is not only accepting Bitcoin as payment for real state transactions, it may soon pay its agents with the burgeoning online currency. But as Bitcoin is increasingly used in lieu of cash for real-world transactions, questions about regulation and transparency are swirling.
The value of the web currency is determined by its users and was conceived in an effort to separate monetary transactions from government control. Most real estate companies accepting Bitcoin will likely use the online currency as a peer-to-peer platform rather than accept the currency directly, William Norton of law firm Baker Donelson Bearman Caldwell & Berkowitz told Law360.
“As long as they can quickly and efficiently accept payments and exchange them back for dollars, [companies] are willing to do it,” Baker said. “It’s a way for them to reduce their transaction cost.”
But using the currency in this way, he said, may open brokers up to state money transfer business laws or even the Patriot Act, which requires banks to monitor the identity of their customers and how they move money around. The use of Bitcoin is supposed to provide anonymity, a feature that clashes with such laws.
In New York, the state Department of Financial Services has an inquiry underway to examine whether the new currency merits the formation of new and different rules, while Washington lawmakers are in the midst of hearings to determine how to regulate Bitcoin.
“The theory is, you can’t have it both ways,” James Jalil, a partner with Thompson Hine who specalizes in cybercurrency and securities, told Law360. “The Bitcoin community can’t say it’s money and should be accepted as currency, and at the same time say it’s not money when it comes to money transfer situations.” [Law360] — Julie Strickland