Buying an Apartment Using Virtual Currency - is it Possible?
Virtual currency is simulated money. However it has real monetary value, just like gold or diamonds.
A transaction for the sale of an apartment in exchange for a virtual currency will consist of three parts:
Virtual currency - what is it?
Virtual currency is simulated money. However it has real monetary value, just like gold or diamonds. This is a numerical value that exists only in special "accounts" called "wallets". To illustrate the concept, let's take your bank account as an example. Every bank, for example Bank Leumi, has a so-called "bank account". This is actually a computerized file in the banking system that is linked to your name, and in this file it is written that you are entitled to, say, a thousand shekels. The file does not contain banknotes or coins - this is a computerized file! A series of bits that make up a certain meaning. The file contains only a collection of digits that represents the balance you are entitled to from the bank or (in the worst case) owes it to the bank, as well as a list of inbound and outbound transactions from the "account" whose summary is the same credit or debit balance.
When you transfer money to the same "account", from another "account", in fact what happens is that the banking system subtracts values from a computerized file - "account" - associated with one person and adds the same values to a computerized file - "account" - associated with you. This is a completely electronic operation. If you withdraw money at an ATM, the ATM, which is also a computer connected to the banking network, subtracts the value you withdrew from the electronic file in the banking system. If you deposit banknotes and coins with the bank clerk, the clerk takes the banknotes, and adds in your "account" (the computerized file) that you are entitled to money worth the banknotes and coins you deposited.
Bitcoin works the same way. Instead of "account" there is a "wallet", which includes the numerical value of the currency (just like an account). All payments using this money are made through transfers from "Wallet" to "Wallet". Transfers are made via the Internet (instead of through the internal banking system). The only difference is that there are no physical bills and coins exchanging hands. Same thing as real money, simply without the physical property of banknotes and coins.
Bitcoin and the law to reduce the use of cash
As we explained in the article "Does the Cash Restriction Law Apply to Virtual Currencies?", In 2021, the state of El Salvador adopted Bitcoin as a legal process, thus in our opinion Bitcoin became "foreign currency" as defined in the Bank of Israel Law and the Cash Restriction Law.
Hence, as we call it, it is not possible to pay in Bitcoin at values greater than the quantitative restrictions which are written in the Cash Restriction Act.
What about other virtual currencies in relation to the Cash Use Reduction Act?
As mentioned, Bitcoin is known to be the first virtual currency created in the world, but it is not the only virtual currency. Today there are several thousand virtual currencies, some more familiar, some less. But Bitcoin is the only virtual currency that has officially become, in our opinion, a "foreign currency" as defined in the Bank of Israel Law.
Hence, all other virtual currencies that have not yet been adopted by states as legal tender are possible to use when purchasing an apartment.
Hence, in our opinion, a deal for the sale of an apartment in virtual currency is possible and legal.
A deal for the sale of an apartment in exchange for a virtual currency consists of three parts:
- Transaction structure
- The technical characteristic
- Characterization of the item
Transaction structure
This part of the transaction for the sale of an apartment in exchange for a virtual currency deals with the contract of sale itself. In the contract of sale we will basically determine the terms of the transaction itself. For example, when the buyer pays in virtual currency, when the seller signs the documents for the sale of the apartment, and so on. The contract of sale is the legal part of the transaction and it is important to build it properly to make sure that all the legal obligations of the seller or the buyer are arranged in such a way that neither party is at legal risk of breach of contract due to poor planning of the transaction structure.
This part is a completely legal part, but expertise in the field of virtual currencies is required to write the contract of sale of the apartment correctly and professionally. One of the issues that needs to be expanded on in the contract is the existence of anti-money laundering procedures, without which the privatization procedure may fail (below).
The technical characteristic
This part is the technical transfer of the virtual currency from the buyer to the seller. When transferring a virtual currency from one virtual "wallet" to another, the transfer cannot be canceled, which requires that we as lawyers faithfully hold the virtual currency as part of the transaction accompaniment.
In addition, a small mistake in transferring the virtual currency from the buyer to the seller can cause all the money to be lost forever without the possibility of “saving” the lost funds. We are lawyers with extensive experience in virtual currency transactions and know how to ensure that there are no mistakes that will result in the loss of funds.
Characterization of the item
This is a part that is done after the transaction is over, ie after the buyer has received the documents that allow the apartment to be registered in his name, and the seller has received the virtual currency, and now he wants to convert the virtual currencies into dollars, euros, shekels, etc., so the seller can use the funds Including payment to the tax authorities for the praise, if created at the time of sale.
After all, the seller will probably have to pay praise tax in a large amount of money to the tax authority, but the income received is not in the money that the tax authority is willing to receive, but in a virtual currency such as Ethereum or USDT.
For this part we need to use in advance the procedures of anti-money laundering on the buyer, which as already written above, must also be included in the contract of sale, otherwise the foreclosure procedure will fail.
This part of the deal is actually contracting with banks that agree to devalue the seller's virtual currency into dollars or euros, or using other means of depletion.
At this point, it should be noted that this article is not intentionally written to provide legal advice and should not be relied upon when performing financial transactions in virtual currencies; In order to obtain legal protection against the fines contained in the Cash Restriction Act, one must obtain a professional opinion document signed by an attorney who is knowledgeable in the field of virtual currency faucets.