Bitcoin has been embraced by many within the investment community but ever since it was created in 2009, the digital asset has faced resistance from regulators, Governments and central banks. Many people utilise Bitcoin in a similar fashion to shares – selling what is held to generate profit – but the liquidated cash from cryptocurrency sales may create unforeseen issues.
“I submitted all of the documents showing the paper trail, transaction data, and tax information relating to my Bitcoin investment, and about an hour later I received a termination email from [the solicitor] saying they could no longer represent us.
“I suggested that I could provide more information if needed but they wouldn’t consider any further details and then stopped answering emails.
“I had to find a new solicitor so I began contacting larger firms and many outright refused to take on the job and others spoke to their compliance departments before declining. After being declined by eight solicitors we eventually found Kingsley Napley.
“Dan from Kingsley Napley put me in touch with a forensic analysis firm called Alaco Analytics that audited my Bitcoin and verified they hadn’t been connected to illegal websites, scams or money laundering, etc. The process took just a week but once the audit came back we could proceed with the house purchase.”
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Bitcoin has a reputation for being utilised by criminals for money laundering and fraud purposes and regardless of whether that is the case or not, the very prospect appears to throw lenders off.
Marcus went on to break down how many of the professionals and firms he dealt with simply dismissed his cash completely out of hand.
He continued: “Most of the reasoning given by the solicitors was ‘it’s against our company policy’ or ‘compliance has said it’s too risky, sorry’ but it became clear they didn’t have the knowledge or experience to take on clients that had invested in cryptocurrencies.
“There had been complications with our solicitor and our deposit. They started asking what if the price crashes and your deposit isn’t enough and we think Bitcoin is a bubble, etc.
Aaron Strutt, a Product and Communications Director at Trinity Financial, reflected on this report and commented on what it could mean for mortgage lenders.
He said: “The vast majority of lenders are not normally keen to provide mortgages to borrowers when their deposits have come from cryptocurrencies.
“Their compliance departments are so hot on money laundering they are simply not willing to take the risk.
“Many of the people who have generated large deposits are particularly annoyed when lenders will not provide them with a mortgage because of the cryptocurrency link. Right now, banks and building societies are being inundated with applications so they can be pickier about who they lend to.”
However, despite the drawbacks, it is not impossible to get the mortgage ball rolling with the returns generated from cryptocurrency and in time, digital assets may become more accepted.
Marcus concluded on this and provided guidance for those who may be hit by the same issues he faced: “If you’re thinking of buying a house with cryptocurrency wealth you should begin the process by finding a solicitor that is willing to work with cryptocurrency wealth. My suggestion is to save yourself the hassle and immediately work with an expert like Daniel Browne at Kinglsey Napley who understands Bitcoin and has experience with certifying cryptocurrency wealth for property purchases.
“Keeping a full paper trail of the money moving into a trading account, transaction data of Bitcoin purchases and sales is essential. On top of this, you’ll need a blockchain audit from a company like Alaco analytics to certify there’s been no illicit activity connected to your Bitcoin. Depending on the number of Bitcoin wallets you’ve used the starting cost will be £1,500 for a full audit but this will be required from the solicitor to satisfy anti-money laundering requirements.
“Despite lots of headlines about cryptocurrency being used for money laundering and crime Chainanalysis research indicates currently less than 0.1 percent of Bitcoin transactions are used for illicit activities. With time crypto will become less scary for legal firms but for now, if you’re looking to buy a house with money from cryptocurrency it’s going to be complicated.”