Inspired by Jafo's thread.
A special purpose vehicle, or SPV in short, is basically a company that does one job. It’s created for a narrow purpose, such as owning a house, or building a project. It can have its own bank account, receive rent, borrow money, sign contracts, and owe debts.
On OffshoreCorpTalk I remember years ago seeing forum posts that talked about how it’s a great loophole to cash out crypto directly into real estate, even in strictly regulated countries like the EUSSR.
Obviously each country has its own rules on what money can be accepted for large purchases.
For example, some first-tier countries still allow you to purchase a property with cash. Others allow crypto deals as well.
But just because it’s legal, doesn’t mean that it’s practically feasible. Meaning that, while theoretically there are still places in Europe or North America where cash or even crypto can be used to buy a house, the average broker or notary/lawyer doesn’t want to take on the AML risk.
Almost all EUSSR real estate or business deals require a lawyer, or a notary (sometimes even a broker) to sign off that the money is legit, and that everything is squeeky clean. Ask yourself, how many of those professionals would be willing to put their license and reputation at risk for a random person off the street, just so that you can buy your house with crypto?
In comes what I call the “crypto friendly” lawyer.
Your alarm bells should always ring when you hear that profession mentioned. As @jafo put it best, lawyers are “merchants of misery and brokers of misfortune.”
These “crypto friendly” lawyers are basically expensive OTC dealers who use SPVs and “investors” to get around many of the strict regulations. At the end of the day, the crypto bro isn’t buying the actual house directly with their coins - they’re buying shares of a company… that already owns the house.
And once the title deed is in the SPV’s name, the company shares are transferred to you. So if you look at the transfer from start to finish, the lawyer usually asks for their nice fat commission upfront (in case you withdraw from the deal). And once the “investor’s” company has bought the property, you pay out the rest of the crypto. And in turn, the shares are transferred to you, which legally means you own the company that owns the real estate.
If you think about it from a land registrar’s perspective, the transfer of shares in a private transaction makes it look that on the surface, the property never actually changed hands. Since it’s the same SPV that still holds the title deed.
For now, this sleight of hand works because the land registry isn't connected to a company registry. Granted, no one knows how this will play out in a few years should the OECD and governments introduce automatic sharing for property info.
The reason why these lawyers even get to act as a glorified, overpriced OTC dealer in the first place, is that they’re entrusted to be gatekeepers for business deals. Many European AML laws depend on licensed professionals to sign off on a real estate deal... and also to report any suspicious transaction activity.
In some EU countries though, you don't even need to involve a third party (Italy is a good example, I think Hungary, Bulgaria and Romania are the same). You’ll usually have a crypto-friendly seller declare to the notary that they have already received the payment in fiat, even though they accepted crypto. While no SPV is needed, it only works if both parties accept crypto.
How do you trust that the investor that they choose for the initial fiat property purchase isn’t an outright convict, or loaded up the company with debts before selling it to you?
Even a recently incorporated SPV can have liabilities that you never knew about.
You can’t really go to the bank and refinance the house or take out a mortgage either, because they’ll look at the original transaction deal and ask 21 questions about why the SPV was bought with crypto. It’s convenient, but it comes at a massive future cost.
And even if your crypto is legit, the concept of due process in the EUSSR is all but a fantasy that they teach you in law school. I’m fairly certain that the EU’s directive 2024/1260 is the boiling frog that will eventually be unleashed on a bunch of naive folks. Should you get slapped with an Asset Confiscation Order, it will be your job to prove where the money came from.
… or better yet, don’t fuck around in the EUSSR. Wellington said it best - own bearer assets.
Robert DeNiro said it even better - don't get attached to anything you can't leave in thirty seconds or less.
Context
A special purpose vehicle, or SPV in short, is basically a company that does one job. It’s created for a narrow purpose, such as owning a house, or building a project. It can have its own bank account, receive rent, borrow money, sign contracts, and owe debts.
On OffshoreCorpTalk I remember years ago seeing forum posts that talked about how it’s a great loophole to cash out crypto directly into real estate, even in strictly regulated countries like the EUSSR.
Obviously each country has its own rules on what money can be accepted for large purchases.
For example, some first-tier countries still allow you to purchase a property with cash. Others allow crypto deals as well.
But just because it’s legal, doesn’t mean that it’s practically feasible. Meaning that, while theoretically there are still places in Europe or North America where cash or even crypto can be used to buy a house, the average broker or notary/lawyer doesn’t want to take on the AML risk.
Almost all EUSSR real estate or business deals require a lawyer, or a notary (sometimes even a broker) to sign off that the money is legit, and that everything is squeeky clean. Ask yourself, how many of those professionals would be willing to put their license and reputation at risk for a random person off the street, just so that you can buy your house with crypto?
The Loophole
In comes what I call the “crypto friendly” lawyer.
Your alarm bells should always ring when you hear that profession mentioned. As @jafo put it best, lawyers are “merchants of misery and brokers of misfortune.”
These “crypto friendly” lawyers are basically expensive OTC dealers who use SPVs and “investors” to get around many of the strict regulations. At the end of the day, the crypto bro isn’t buying the actual house directly with their coins - they’re buying shares of a company… that already owns the house.
And once the title deed is in the SPV’s name, the company shares are transferred to you. So if you look at the transfer from start to finish, the lawyer usually asks for their nice fat commission upfront (in case you withdraw from the deal). And once the “investor’s” company has bought the property, you pay out the rest of the crypto. And in turn, the shares are transferred to you, which legally means you own the company that owns the real estate.
Sleight of Hand Explained
If you think about it from a land registrar’s perspective, the transfer of shares in a private transaction makes it look that on the surface, the property never actually changed hands. Since it’s the same SPV that still holds the title deed.
For now, this sleight of hand works because the land registry isn't connected to a company registry. Granted, no one knows how this will play out in a few years should the OECD and governments introduce automatic sharing for property info.
The reason why these lawyers even get to act as a glorified, overpriced OTC dealer in the first place, is that they’re entrusted to be gatekeepers for business deals. Many European AML laws depend on licensed professionals to sign off on a real estate deal... and also to report any suspicious transaction activity.
In some EU countries though, you don't even need to involve a third party (Italy is a good example, I think Hungary, Bulgaria and Romania are the same). You’ll usually have a crypto-friendly seller declare to the notary that they have already received the payment in fiat, even though they accepted crypto. While no SPV is needed, it only works if both parties accept crypto.
Red Flags
How do you know that these lawyers aren’t informants or honeypot spooks?How do you trust that the investor that they choose for the initial fiat property purchase isn’t an outright convict, or loaded up the company with debts before selling it to you?
Even a recently incorporated SPV can have liabilities that you never knew about.
You can’t really go to the bank and refinance the house or take out a mortgage either, because they’ll look at the original transaction deal and ask 21 questions about why the SPV was bought with crypto. It’s convenient, but it comes at a massive future cost.
And even if your crypto is legit, the concept of due process in the EUSSR is all but a fantasy that they teach you in law school. I’m fairly certain that the EU’s directive 2024/1260 is the boiling frog that will eventually be unleashed on a bunch of naive folks. Should you get slapped with an Asset Confiscation Order, it will be your job to prove where the money came from.
Solution - Cut Out the Middle-Man
An SPV is still a good legal concept. Just don't broker the deal through people you don't trust, like a shady third-party lawyer. Do business with people you know in person, foster good connections with them (for Westerners, it means spending time with follks OUTSIDE OF BUSINESS. That's gives you way more information on who a person is). Then the process can remain the same- they buy the property for you in fiat, and you use the same SPV principle to pay them back in crypto.… or better yet, don’t fuck around in the EUSSR. Wellington said it best - own bearer assets.
Robert DeNiro said it even better - don't get attached to anything you can't leave in thirty seconds or less.
