Buying a Home with Cryptocurrency

Cryptocurrency, such as Bitcoin and Ethereum, is no longer a niche product. Many people now hold some form of digital currency, and some are beginning to use it to help fund property purchases.

If you are planning to use cryptocurrency as part of your house deposit or purchase monies, you should be aware that your conveyancer will need to carry out extra checks. 

These checks are not optional. 

They are a legal requirement under the United Kingdom’s Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017.

Why cryptocurrency is treated differently

The involvement of cryptocurrency in a property transaction increases the risks of money laundering, terrorist financing and sanctions evasion. There are several reasons for this:

• Cryptocurrency has historically lacked the same controls and regulatory framework as traditional money such as pounds sterling or United States dollars.

• It is a relatively new and fast-moving financial product, which makes it difficult to assess the reliability of different currencies and service providers.

• Criminals have used cryptocurrency to try to launder or hide illegal money, often through tools such as “tumblers” or “mixers” which deliberately obscure the history of ownership.

• Many frauds and scams have been linked to cryptocurrency, including the well-known OneCoin scheme, which turned out not to be a genuine currency at all.

Because of these risks, the law requires conveyancers to apply Enhanced Due Diligence whenever cryptocurrency is involved.

What your conveyancer will usually ask for

If you intend to use cryptocurrency in your property purchase, you should be prepared to supply the following:

1. Proof of the original source of funds
   – For example, salary slips, savings records, inheritance documentation, or documents showing the proceeds of a previous sale.

2. Bank statements
   – Demonstrating money leaving your bank account and being transferred into a cryptocurrency exchange or wallet.

3. Cryptocurrency exchange or wallet statements
   – Confirming the purchase of cryptocurrency and showing that it matches your bank transfer.

4. An up-to-date wallet overview
   – Showing your current balance and holdings.

5. Wallet address details
   – Allowing your conveyancer to check transactions against publicly available blockchain records, such as those available on blockchain.com.

6. A written explanation
   – Explaining why you invested in cryptocurrency and how you built up the funds used to buy it.

Limits and restrictions

Not all law firms will accept cryptocurrency as a source of funds. Some conveyancers impose limits, for example refusing to act if a client holds more than a certain value in cryptocurrency. Others will only act if the cryptocurrency is held with a provider that is regulated in the United Kingdom by the Financial Conduct Authority (FCA) or by an overseas body applying comparable standards.

If you hold cryptocurrency, it is very important to raise this at the start of the transaction. Your conveyancer will then be able to confirm whether their policy allows them to act for you.

Why there may be additional fees

Verifying cryptocurrency transactions is more complex than dealing with traditional bank transfers. Conveyancers may therefore charge an additional fee for the extra work required. This fee covers the time spent reviewing documents, reconciling transactions and carrying out enhanced risk assessments.

What happens if you cannot provide evidence

If you are unable or unwilling to provide the documents listed above, your conveyancer will usually have no choice but to stop acting for you. The regulations are strict and firms cannot proceed if they cannot fully verify the source of your funds.

The bottom line

Cryptocurrency can be a legitimate and accepted source of funds for a property purchase. However, it is always treated as high risk, and you should expect to provide more evidence than if you were paying solely with traditional currency.

By preparing your documents in advance, and by being open about your cryptocurrency holdings from the very beginning, you will make the process much smoother. Just remember that every firm has its own policy, and some may only accept smaller holdings or funds held with regulated providers.