The Reserve Bank of Australia (RBA) does not consider bitcoin or other cryptocurrencies to be legal tender in Australia. This means that most banks and other mortgage lenders are unlikely to accept crypto as a home loan deposit. However, it is possible to buy a house with bitcoin in Australia, but it may not be easy to find a seller who is willing to accept Bitcoin as payment, as it’s with private sales where Bitcoin is more commonly accepted, and generally when the seller is rather crypto-savvy themselves.
What is Bitcoin?
Bitcoin is a decentralised digital currency that was created in 2009 by an unknown individual or group of individuals using the pseudonym Satoshi Nakamoto. Unlike traditional currencies, which are issued by central banks, Bitcoin is created and managed through a network of computers that use complex algorithms to verify and record transactions on a public digital ledger called the blockchain.
One of the key features of Bitcoin is that it is not controlled by any central authority, such as a government or a bank, and in Australia, the RBA has no governance on the value of the currency, and plays no part in the way in which it is transacted. Transactions with Bitcoin are made directly between individuals without the need for intermediaries, which can reduce fees and make the process faster and more efficient, but this point-to-point advantage also circumvents oversight and authority, so the currency is generally not recognised in most property transactions that involve Government oversight.
Land registries that handle property titles in Australia are managed by the individual states and territories, and some have only recently moved away from paper-based systems to digital e-conveyancing. While government organisations are no doubt investigating the potential of using blockchain to manage land titles, they’re still a long way off from supporting these kinds of transactions.
Crypto is a relatively secure and anonymous way to make payments. Transactions on the blockchain are encrypted, which makes it difficult for hackers to steal personal information or funds (while banks have multiple weaknesses that might be exposed). An advantage, and the Achilles’ heel of Bitcoin is the anonymity of the coin, and any single user may create multiple Bitcoin addresses, which can make it difficult to trace a particular transaction to a specific individual.
The value of Bitcoin – anecdotally regulated by ‘sentiment’ and the tweets of wealthy tech tycoons – is extremely volatile, which means that it can fluctuate greatly in a short period of time. This can make it difficult to use as a reliable store of value or a means of exchange. Additionally, the lack of regulation and oversight in the Bitcoin market can make it susceptible to fraud and other forms of misconduct.
While Bitcoin has the potential to revolutionise the way we make and manage payments, it is still a relatively new and untested technology. It remains to be seen whether it will become a widely-accepted and stable form of currency, or if it will ultimately go the way of MySpace.
Can I Use Crypto or Bitcoin for a Home Loan Deposit?
Once your crypto portfolio has built up enough value, you may choose to liquidate your crypto coins for cash, and may often use this money to pay for your mortgage deposit. However, when liquidating Crypto you will need to budget for Capital Gains Tax (CGT) on your sold crypto, so you may not be able to put your portfolio’s full value towards your deposit.
Keep in mind that may lenders require a home loan deposit that’s at least partly made up of ‘genuine savings‘. This typically means ‘money earned from your job’, though money from sold investments may count if the cash is in a savings account or term deposit for a length of time, often six months or more. This helps prove to the lender that you can manage money responsibly, without rushing out and spending it, and therefore the risk of you defaulting on your home loan repayments is lower.
Bitcoin Price Graph
The following Bitcoin week graph (if currently available) shows the value of Bitcoin, and the volatile nature of its movement. You should always consult a Financial Planner with crypto expertise before investing into the market.