Propy, a blockchain-powered company licensed as a title company in three states, is financing the upcoming sale of a Hawaii condominium through a token backed by cryptocurrency and the property itself.
The sale is scheduled for Jan. 29, for this income-producing property in Honolulu, with the price starting at $250,000.
"It's a very, very crypto native transaction, and that's why it's more of a first-ever innovation," said Natalia Karayaneva, Propy's CEO. Besides participating in real estate sales, Propy is
"The seller reached out to us to tokenize the property, just like we did before for [an] instant property sale on [the] blockchain," Karayaneva said. But in this case, Propy is going a step further and providing the funds to a buyer.
"It's a property owned by an LLC [limited liability corporation], and in the legal framework, there is a statement of whoever owns this token on blockchain owns the LLC and the property respectfully," Karayaneva explained.
In 2017, Propy
That December, it began letting Californians buy and sell properties on its blockchain.
With the Hawaii transaction, half the collateral for the financing will be the property itself, while the crypto portion can be bitcoin, ethereum or a stablecoin tied to the U.S. dollar, Karayaneva said.
However, the borrower will have a 10% interest rate for this financing, higher than traditional owner-occupied residential mortgages. This week's Freddie Mac Primary Mortgage Market Survey put the
The most recent transaction Propy facilitated involved a traditional real estate investor who exclusively held dollars in her account.
"So we said, 'Okay, let us help you to convert your dollars into a digital dollar,' which is USDC," Karayaneva said, adding that particular stablecoin is backed 1-to-1 with the dollar. "We did it within a couple hours, and then she was participating in the bidding process with her USDC, so there is no fluctuation."
Speed to close after the sale is the difference. The time-consuming work is done in advance in order to tokenize the property. Once it is on the blockchain, the property is liquid and can be transferred on the spot, Karayaneva said.
While Propy is going solo for this transaction, if things are successful, it could scale up with partnerships to fund more deals. It's very rare that real estate deals are all-cash, some form of financing is needed.
"Whether we will obtain our own capital or we'll have a partner with available capital, lenders that would provide those loans to bitcoin holders, that's a question. But I'm sure it's the first step, the first innovation that would absolutely impact the mortgage industry at large," Karayaneva said.
