MAY 1, 2022 | Issue 13
"HOW LONG WILL IT TAKE BEFORE I UNDERSTAND CRYPTO?"
I am asked a version of this question at least four times a week. The answer depends upon your background and how much time you invest in educating yourself.
It won't take you long to learn how crypto fits with real estate if you are conversant with economics, finance, monetary policy, fiscal policy, the regulatory process, tax rules, global economics, anti-money laundering, politics, cryptography, currencies, foreign exchange, decentralized ledgers, computer hardware, software, venture capital, and digital currency,
What??? You don't have that knowledge base? Then it may take a while. But that's fine, because until crypto becomes mainstream, your familiarity with it won't be essential.
However, if you want to be early to the crypto real estate party, you'll need to carve out a few hours every week.
The most efficient way to learn almost anything, is to learn from others. I spend a lot of time every week researching and writing Crypto News for Realtors so you can learn what I've learned.
In turn, I learn from reading major publications (Wall Street Journal, New York Times, Bloomberg), crypto sites (CoinTelegraph, CoinDesk), listening to crypto podcasts (The Breakdown and Unchained), and reading a paid crypto newsletter (The Bitcoin Layer). There are certain experts whose styles resonate with me.
This is how I learn. Find what works for you. Check out my recommended "resources" and "influencers" in each newsletter.
Also, if you want to jumpstart your crypto literacy by taking a comprehensive paid course on crypto and real estate, please reach out to me. I am getting requests to create a course, and I am considering it.
In the meantime, reach out with your questions.
The best part of writing this newsletter has been meeting agents and others around the US. As always, I'm here for you! I hope you had a fun weekend. Have a productive 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
▸ Crypto Lender Abra Partners With Propy Abra, one of several companies offering loans to crypto holders, announced a partnership with Propy. Propy is a crypto real estate startup that facilitated two recent home sales in Florida that used NFTs to transfer the deed. Borrowers with significant crypto holdings can use their crypto as collateral for a cash loan. This allows them to purchase real estate without having to sell their crypto and incur a potential capital gains tax liability. Crypto's price volatility can impact a borrower who uses a lender such as Abra. If the price of crypto drops below a designated amount, there will a "margin call" to restore the value of the collateral. The borrower will be required to increase their crypto balance. Conversely, if the crypto price rises, the lender may release some of the crypto back to the borrower. The Propy and Abra partnership should benefit Propy in their next "real estate as an NFT" transaction. Propy's two NFT house transactions stipulated that buyers had to pay with crypto. The first house was purchased with Ethereum and the second with a crypto "stable coin" that was linked to the US dollar. If Propy's third transaction allows a borrower to pay with cash provided by Abra, would ownership of the property still be transferred to the buyer through an NFT? If so, Propy's value proposition seems to be getting even murkier.
▸ Realtor Celebrity Launches Crypto Real Estate Startup
Christine Quinn announced the launch of RealOpen, a company that will "make digital assets accessible everywhere."
There is not much information about RealOpen's services on their site.
Other press reports state the company will list properties and target buyers who want to pay with crypto. Their platform will confirm the buyer's crypto holdings and convert it to cash at closing.
While I did not discover anything unique about RealOpen other than using a celebrity to tap into crypto buyers and star struck real estate agents, I did learn a new word. Their home page states, "We are the bridge between the bright future of digital assets and the anachronistic industries in need of disruption."
▸ Fidelity Will Offer Bitcoin to Its 401(k) Accounts. US Department of Labor Expressed Concerns.
Over 23,000 companies use Fidelity to administer their retirement plans. Later this year, employees will be able add cryptocurrencies to their retirement accounts.
Dave Gray, head of Fidelity's retirement offerings, said, "There is a need for a diverse set of products and investment solutions for our investors. We fully expect that cryptocurrency is going to shape the way future generations think about investing for the near term and long term."
Fidelity will cap transfers and new contributions of bitcoin to 20% of 401(k) account balances. Employers, however, can provide a lower percentage.
The Labor Department's Ali Khawar said that the crypto market's volatility and valuation methodologies make it challenging to investors. He said it is too early for crypto to be part of Americans' retirement savings.
Fidelity responded, "At a time when foundations, endowments and now pension plans are investing in cryptocurrency, blocking access puts everyday Americans at a structural disadvantage, deepening an already wide retirement gap."
▸ Central African Republic Becomes Second Country To Adopt Bitcoin As Legal Tender
Central African Republic (CAR) is one of the poorest countries in the world and has been involved in decade-long conflict.
While poverty is rampant, the country sits on vast mineral deposits of gold, uranium, and diamonds.
Like other French colonies in Africa, CAR's currency is the French-backed CFA franc.
After CAR announced its adoption of bitcoin, many commentators reported that the adoption of bitcoin is an attempt to breakaway from reliance on the CFA.
President Fausin-Archange Touadera countered that it would "improve the conditions of Central African citizens" and transform CAR into one "of the world’s boldest and most visionary countries.”
Economist Yann Dawaoro told the BBC, "Businessmen will no longer have to walk around with a suitcase of CFA francs that will have to be converted into dollars or other currency to make purchases abroad."
▸ New York State and Fort Worth, Texas Take Different Approaches to Crypto Mining
New York State Assembly passed a bill that restricts future crypto mining to those powered by renewable sources. If a companion bill is passed by the state senate, the restriction becomes law.
If the New York Senate enacts a companion bill, New York will send a strong signal to the crypto industry that any future crypto mines must be powered by renewable sources.
Conversely, Fort Worth, Texas, is the first U.S. city to start its own mining operations. Fort Worth partnered with the Texas Blockchain Council and launched a pilot project with three mining computers.
Texas aggressively pursued crypto miners following China's ban of the crypto industry.
▸ "The Mooch" Is Back
Anthony Scaramucci was the White House Director of Communication for 11 days in July 2017 under President Trump. Today, he's becoming a common guest on business shows talking about how his hedge fund is focused on blockchain.
A new fund, UNLOX, will target institutions to securitize property, corporate securities and venture capital with crypto assets.
SkyBridge was an early entrant among hedge funds in acquiring bitcoin.
▸ Goldman Sachs Offers Bitcoin-Backed Loans Goldman provided its first loan that was collateralized by bitcoin. The loan broadcasts that Goldman's digital-assets team is pursing crypto lending. Currently, lending against crypto is dominated by crypto-centric firms.
CRYPTO CLASS – TOKENIZING REAL ESTATE
Some real estate developers are exploring selling digital shares of their projects as tradable tokens.
The benefits are enticing. Carving up a project into small tokens will broaden market participation, increase liquidity, lower costs, increase transparency, and provide additional capital.
If a developer is willing to embrace the regulatory challenges, they will typically take the following path.
1) Form a special purpose vehicle (SPV) that creates a subsidiary entity to limit financial liability, or include the project in a REIT or Real Estate Fund.
2) Select a platform that will create the tokens and the "smart contract" that will outline the terms of the agreement between the buyer and seller.
3) Create and issue the tokens on the blockchain in a Security Token Offering (STO).
After the tokens are offered, they could be traded on a secondary market, such as SolidBlock.
The St. Regis Aspen resort is an example of a successful tokenization project. The resort owner, Elevated Returns, offered its hotel ownership through token sales. The STO was through a REIT structure and complied with security regulations. Elevated Returns sold Aspen Coins, the tokens, on the Ethereum blockchain, and raised $18 million.
INFLUENCERS - People to follow Anthony Pompliano – @APompliano Anthony Pompliano has 1.5 million followers on Twitter and 379,000 subscribers on YouTube. He has an investor newsletter and podcast. His YouTube videos are worthwhile because he provides long term perspective on hot crypto news.
RESOURCES – Books, websites, podcasts, articles Investopedia defines and clearly explains any terms related to money, finance, or business. Their crypto words have terrific entries and provide useful links. More common terms also have "explainer" videos.
CRYPTO WORDS – NORMIES
Crypto investors disparage people who don't embrace crypto as normies. Normies typically don't understand crypto and dismiss it as a craze, bubble, or a tool for criminals to launder money or engage in activities on the dark web. "Normies don't get it."
OH, ONE MORE THING –
Thanks for reading! See you next week.
Btw, regarding the contest announcement last week, no one provided the correct answer. So, here's a clue – pizza. Go to Crypto News for Realtors to read previous issues.
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