BCFSA advises cryptocurrency caution
At a glance (3 minute read)
- BCFSA is advising REALTORS® exercise caution, understand the risks, and seek legal advice if their clients are looking to use cryptocurrencies in a real estate transaction.
- Cryptocurrencies aren't legal tender, which limits how they can be used.
- FINTRAC requirements still apply.
If a buyer or seller wants to use cryptocurrency in their real estate transaction, beware.
The BC Financial Services Authority (BCFSA) advises REALTORS® to exercise caution, understand the risks and seek independent legal advice to protect their client’s interests.
Mitigating the risk cryptocurrencies can add to the real estate transaction helps uphold confidence and stability in the real estate market.
Trust accounts
| Typical real estate transaction | Cryptocurrency used in transaction |
|---|---|
| Funds are held in a brokerage trust account. | Brokerages are unable to hold cryptocurrency deposits in trust. |
| Trust accounts are protected as provided in the Real Estate Services Act (RESA), should the deal collapse. | The buyer and seller must negotiate for a third party to hold the deposit. This increases risk since cryptocurrencies aren’t protected under RESA and could be misappropriated. If the deal collapses, the client may have to sue to recover funds. |
Seek legal advice
Protect your client’s best interests
Realtors have a duty to act in their client’s best interests, which helps to maintain confidence in the real estate profession, the industry, and the financial services sector.
Realtors should take extra steps to access, provide, and document clear advice if a client is considering using cryptocurrency in a real estate transaction.
Not legal tender
Legal tender, currency that courts recognize as payment for monetary debt, is controlled and backed by a central authority like a bank or a government.
Cryptocurrency, on the other hand, is digital or virtual, decentralized, and backed by a distributed cryptographic ledger called a blockchain. Courts view it as an asset, which means it needs to be sold or traded for legal tender to pay legal debts. This limits how cryptocurrencies can be used in a transaction.
FINTRAC requirements
The source of a cryptocurrency payment may not be discoverable, as in a cash transaction.
Realtors must be familiar with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) reporting requirements which include doing your best to prevent money laundering and terrorist financing. These reporting requirements include:
- New guidance on Large Virtual Currency Transaction Reporting requirements that came into effect June 1, 2021, under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
- FINTRAC Guidance for Real estate brokers or sales representatives, and real estate developers which includes knowing your client, reporting, and record keeping obligations.
BCFSA on the lookout
Our regulator’s advice
The BCFSA strongly advises:
- in any real estate transaction Realtors take the time to understand the risks and inform themselves and their clients before proceeding; and
- anyone considering the use of cryptocurrency in a real estate transaction to exercise caution and seek independent legal advice.
Read the BCFSA News Release