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First real estate sale using crypto in Cayman

Parallel Limited has brokered the first real estate transaction in cryptocurrency in the Cayman Islands, involving a private residence that sold for more than US$5 million.


Parallel served as an escrow agent for the sale, which was paid for entirely in cryptocurrency but, in this case, priced in US dollars. The seller received the amount in cash on closing day.


‘New era’ of property transactions


Laura Birrell, Parallel’s CEO, said in a press release the company was created to give crypto investors a legal and compliant way of converting their crypto gains into tangible real estate.


“The sale heralds a new era of property transactions in the Cayman Islands and is an exciting step forward for its real estate industry, which is one of the most robust in the world,” Birrell added.


Realtor Michael Joseph, from Property Cayman, who sold the first property ever purchased with cryptocurrency, told the Cayman Compass he had wanted to facilitate a crypto-related transaction for years.


The issue had always been verifying the source of funds and satisfying various local regulators, including the Cayman Islands Monetary Authority and the Department of Commerce and Investment as the anti-money laundering supervisor for realtors.


This left prospective buyers with the only option of converting their crypto assets to fiat currency and transferring it to Cayman through the traditional banking system.


This only changed when Parallel was granted a virtual asset services provider (VASP) registration by CIMA in February of this year.


Under Cayman’s regulatory framework for digital asset services, anyone who facilitates crypto transactions must be licensed and supervised by the regulator.


The legal framework offers protection to investors, as VASPs are subject to regulatory oversight in areas such as anti-money laundering compliance, governance and cybersecurity.


Tapping into new buyers


Parallel became the first, and so far only, real estate cryptocurrency escrow provider offering a method to use bitcoin to buy and sell properties on island.


“Being able to attract crypto investors is a game changer for the market,” Birrell said.


Joseph agrees, noting that the world of high-net-worth individuals is evolving. “We’ve got to remember that our market space is a whole bunch of newer, younger people whose wealth has come from crypto investments in one way or another.”


For property sellers and their real estate agents, the desire to tap into a growing pool of buyers who want to convert their digital assets into tangible property is only logical.


International crypto investors, on the other hand, would not lose money on exchange fees and conversion rates, in a sale conducted entirely using bitcoin, making the cross-border purchasing process much smoother.


Managing the volatility of digital assets during the sales process may be a concern for sellers, who typically have a specific price in mind. But even if buyers purchase a home using cryptocurrency, the seller can choose to receive payment in dollars.


Aside from using a crypto escrow services provider, who works with realtors and lawyers, the sale and conveyancing process remains unchanged.


“It absolutely is as smooth as can be,” Joseph said. “We still had to undertake our due diligence process on the seller side and the normal due diligence on the purchaser side. And then Parallel took care of the due diligence and particularly source of funds on the purchasers.”


The Property Cayman realtor said, “The reality is that this was a normal transaction. The purchaser just happened to use crypto to generate the funds.”


Adjusting to crypto


Still, for the Cayman Islands property market, the transaction is pushing the envelope.


The Cayman Islands Real Estate Brokers Association was concerned and at first took a dim view of the crypto sale, forcing the realtor to explain.


“I’ve kind of put myself in a bit of a firing line with CIREBA,” Joseph admits and said he put the association in touch with Parallel for CIREBA to better understand the ins and outs of the transaction.


There is some way to go before the local market will get used to seamless end-to-end crypto real estate transactions.


Although Parallel is licensed to facilitate real estate transaction in cryptocurrency between a buyer and a seller, realtors, lawyers and conveyancers still have to be paid in dollars under local regulations. In addition, the government expects to receive stamp duty on property transactions in US or CI dollars.


Joseph said he personally would be prepared to be paid his fee in cryptocurrency but believes his company would have to be licensed itself to be able to do so.


That would be a major stumbling block given the complexities of becoming a registered VASP.


Breaking ground


The first crypto real estate sale may have come at an unusual time.


The price of bitcoin reached almost US$70,000 at its peak in November 2021. Since then, the market has crashed, wiping out almost $2 trillion in digital assets. Only last week bitcoin traded at below $20,000 but it has gained almost 16% in the last three days.


This volatility is both a reason to hold and to sell depending on the investor’s risk appetite.


Some exiting the market or diversifying their portfolios, having been stung by the downturn, may well choose to convert their crypto into another more stable asset class.


Others, believing the market has bottomed out, may not want to lock in any losses by buying real estate with their crypto holdings at this time.


In either case, for Joseph, the first crypto real estate sale has broken the seal, signalling to international buyers that there is a regulatory framework in Cayman to accept cryptocurrency for property purchases.


“The fact that Parallel has managed to be licensed and authorised to do this is a game changer,” he said. “And I absolutely see the floodgates opening here and the opportunities coming from it.”


Source: Cayman Compass


IMS is one of the longest established company management firms in the Cayman Islands. IMS is licensed by the Cayman Islands Monetary Authority to provide independent directors, company management and incorporation, mutual fund administration, captive insurance and trust services. For more information about our services, please contact us.


Disclaimer: this publication does not constitute legal or professional advice and should not be relied on as such.

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