Q. I understand that a real estate broker collected something called “Bitcoin” at a closing? What is Bitcoin? Can a broker collect this as a commission?
A. Bitcoin is a digital currency unattached to any government. It permits international transactions to take place without the concern of exchange rates, bank regulations and fees. Bitcoin was created in 2009 by an unknown person using the alias Satoshi Nakamoto. The value of Bitcoins is not bound to any hard currency; the value is determined by the demand for Bitcoins. There are several Bitcoin exchanges that allow individuals to buy or sell Bitcoins using different currencies. Currently one Bitcoin is worth approximately $970.00 US Dollars. Mt. Gox, based out of Tokyo, Japan, is the largest Bitcoin exchange. Bitcoins can be sold and bought anonymously, because there is no requirement to provide your real identity. Bitcoins are stored in a digital wallet similar to an online bank account, but unlike bank accounts there are not insured by the FDIC.
While beneficial for allowing unencumbered transactions, the use of Bitcoins lacks the same security of government based currency. Additionally, since valuation is tied to demand it can be subject to greater swings in price.
Bitcoins can provide another avenue for real estate brokers and clients to exchange compensation, but deciding whether or not to allow digital currency as acceptable compensation will be a business decision based on each real estate broker's circumstances. While there are no restrictions on what a real estate broker may accept as compensation for their services (provided the compensation is legal), Bitcoin represents brand new territory and the legal and regulatory implications, including tax implications, should be carefully vetted by legal and tax professionals. As such a real estate broker must proceed with caution and with appropriate professional guidance before accepting Bitcoin and similar digital currency.
The Legal Line Question by:
Neil B. Garfinkel
REBNY Broker Counsel
Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP