When considering the purchase of real estate with crypto assets, many are faced with the choice of whether to sell or capitalize on crypto assets.

In Japan, it is not common to purchase real estate directly with crypto assets.

A realistic alternative used instead is to borrow Japanese yen using crypto assets as collateral and use the funds to purchase real estate.

This article will organize this structure from a practical perspective.

Basic Structure of Crypto Asset-Backed Loans

The general scheme is as follows

1. Pledging crypto assets held as collateral
2. Borrow Japanese yen based on collateral valuation
3. Purchase real estate with borrowed Japanese yen
4. Collateral is returned upon completion of repayment.

The important point is that crypto assets are used as "collateral" rather than as a "means of payment".

Why "Borrow without Selling"?

While the method of selling crypto assets outright to fund real estate is simple, it has the following disadvantages

• Likely to be taxable at the time of sale.
• Lost opportunity for future price increases
• Portfolio diversification breaks down.

On the other hand, if you pledge as collateral and borrow Japanese yen,

• In principle, no tax is levied at the time the collateral is pledged.
• Can continue to hold crypto assets
• Diversification into real assets in the form of real estate is possible.

For this reason, more and more people are choosing to rent instead of sell.

Collateral valuation and price volatility risk

In crypto asset-backed lending, there are risks that must be understood.

• Collateral valuation is done on a market value basis.
• Additional collateral (margin call) may be required when prices fall
• In some cases, forced liquidation occurs if the amount falls below a certain level.

The following points should be carefully considered, especially if the funds are to be used to purchase real estate

• Is the property intended to be held for a long time?
• Can you afford the repayment plan?
• Is the design able to withstand fluctuations in crypto asset prices?

When to use it for real estate purchases

The following points must be confirmed when using funds raised by crypto asset security to purchase real estate

• Reliability of financial institutions and loan providers
• Clarity of collateral and liquidation conditions
• Consistency with Japanese real estate transaction practices
• Can it be organized for tax and accounting purposes?

The connection with the real estate side of the practice is very important to avoid a situation where "funds can be borrowed, but the entire transaction is not consummated."

summary

Borrowing Japanese yen against crypto assets to purchase real estate is one of the realistic and legal options available in Japan.

However,

• Price fluctuation risk
• liquidation conditions
• Organize tax and legal affairs

It is dangerous to proceed without understanding the

At CryptoHome, we emphasize the importance of "choosing the right one" based on a proper understanding of these mechanisms and providing services in cooperation with reliable vendors.

Next time,
Is it illegal to conduct real estate transactions utilizing crypto assets?"
Japanese legal system and regulations will be organized and explained.