Cryptocurrency is rapidly moving from concept to closing table — and its implications for real estate professionals are too significant to ignore.
At this year’s National Settlement Services Summit (NS3) in Kansas City, Mo., panelists presented on the topic, “From Token to Title: Applying Cryptocurrency for Real Estate Opportunities.” Zach Ipour, co-founder of Megatel Homes and MegPrime, along with Trey Hoppe, co-president of MegPrime and the executive vice president/managing director at Megatel Capital Investment, shared their insights on this important topic with the NS3 audience. Marx Sterbcow, managing attorney at Sterbcow Law Group, served as moderator for the session.
MegPrime Holding is offering and selling the MegPrime ($MPP) Token. The token is being marketed as a crypto asset that consumers can use for purchases and earn digital rewards through both additional tokens and points that represent the amount of dollars spent with the tokens. MegPrime is the issuer of the token and is managing the rewards program.
Ipour explained that Megatel Homes, which develops large master plan residential communities, has spent multiple years formulating the MegPrime Token, a universal payment token.
“It took us over five years trying multiple different models until we came up with a whole entire MegPrime (Token) that is combining the real estate real world asset with the blockchain technology and crypto (so) that we can provide the true solution to the homebuyers,” Ipour said. “This is something unique, new, and it has never been done before, but we believe this is the ultimate answer to the affordability issue that everybody’s facing across the country. It’s been our passion in the last several years to finally launch the product that everybody will benefit (from).”
Ipour and Hoppe explained how they came up with the payment platform and everything else that the MegPrime Token offers. Hoppe noted the company recently earned a major victory from the federal government.
Megatel and MegPrime wanted to offer the MegPrime Token without being required to register it as a security under the Securities Act of 1933. Attorneys representing Megatel Homes and MegPrime sent a letter to the Securities and Exchange Commission’s (SEC’s) Division of Corporation Finance asking the division to confirm it would not recommend enforcement action against MegPrime in connection with the digital token being offered. Jonathan Ingram, deputy chief counsel with the Division of Corporation Finance, sent a letter to the entities saying his office would not recommend enforcement action.
“MegPrime is the first payment token that has received the SEC no-action letter, which allows us to offer all of these … incentives under the MegPrime platform,” Ipour added. “No crypto company has ever received this non-action relief before.”
Sterbcow explained the SEC “no-action” letter is critical and represented a major step toward allowing Megatel and MegPrime to move forward with offering the MegPrime Token.
“The SEC no-action letter is also important because that means you don’t have to register these tokens in every single state,” Sterbcow said. “Having the feds pre-empting the states, it kind of clears the deck for you.”
A pivotal moment in the process, Hoppe said, is when company leaders met with the SEC and its staff to explain the token concept to them.
“We explained who we are, what we are trying to accomplish, and what do we need from them in order to accomplish this goal,” Hoppe said. “Obviously, they (SEC) were hesitant, but later on, when they understood the concept, they were very supportive.”
Ipour and Hoppe then discussed how the token works for the consumer.
“For the purpose of the spending, the owners or anybody that is using our payment platform, the price of the token really doesn’t matter,” Ipour said. “It can go up and down, but they can still use that MegPrime as a benefit of blockchain technology for the purpose of their spending.”
Ipour emphasized they cannot guarantee the stability of the MegPrime token because of its volatility. It’s a payment platform that is empowered by digital currency.
“The value of the token is really not about its price. … The value of the token really is in its nature as a spending mechanism,” Hoppe said. “In the world that we live in … that all revolves around credit card points, we’re saying just utilize it as an everyday spending mechanism, making it easy through the credit card, through the bill pay, and through the app, similar to what you're seeing with Venmo and PayPal.”
Sterbcow gave an overview on how the MegPrime Token model works: if he wants to go buy or pay his rent, he can put money into MegPrime, buy MegPrime Tokens, and then he can either pay his landlord in U.S. dollars or in MegPrime Tokens. Every time a payment is made, a reward is earned through rebated dollars back.
The challenge is that businesses often do not accept crypto for payments. Hoppe noted the technology was developed in a manner that allows a consumer to use crypto in multiple types of transactions.
“(We’re) creating a technology that allows for you as the user to be able to transact in this token, and that receiver, or that merchant, whether it's a coffee shop or a mortgage servicer, is able to receive that currency in whatever currency they want,” Hoppe said.
Ipour agreed, looking at it in a simpler way.
“Our business is very straightforward. We needed to create some value proposition for the renter and for the future homebuyers or current homebuyers, that was our number one goal,” he told the NS3 audience. “… To create that value, we have to create a payment platform and get everybody to use that payment platform in a way that can deliver those values to the providers for renters.”
Ipour said the goal is geared toward, “really providing the value for the renters that could help them to buy their homes and ultimately helps the whole entire real estate industry. … We created the opportunity that everybody would contribute for this value proposition that ultimately benefits the vendors.”
Ipour then shared an overview of how the MegPrime reward points system works.
“We promise the renters that if they pay their rent payment (with the MegPrime Token) through the MegPrime app, for every dollar that they spend paying their rent, they will earn one point,” Ipour stated.
As an example, Hoppe said if he is paying $2,000 per month on rent, traditionally that meant he was spending $24,000 in after-tax income.
“I'm never getting that back. And what we're saying is, you now have accumulated 24,000 points that can go towards a home purchase,” Hoppe said.
Through partnerships that MegPrime has with builders, including Megatel Homes, homebuyers can receive up to $25,000 to spend on home purchase costs. Even if the builder does not have a partnership with MegPrime, the renter can still receive up to $12,000 that they can put toward purchase costs on any home in the country.
“For renters who want to be homebuyers, we're saying turn that rent into equity in a house,” Hoppe added. “… Why would I pay my rent with crypto? I have no reason to unless I'm getting those types of rewards, and so incentivizing renters with those types of rewards is really what will help with that adoption.”
Ipour closed this particular discussion by referencing volatility of the token in this model, but noted that volatility does not impact the benefit that a prospective homebuyer receives.
“Our goal is to give you $12,000 that you can use for home ownership,” Ipour said. “… The price of the token at the time that you're receiving it can be $1 or 10 cents. You will get enough MegPrime token equivalent to $12,000 U.S. dollars. If the token price goes up or down, it doesn't affect the $12,000.”
The panelists also discussed what they anticipate over the next 12-to-24 months with their program in terms of the rollout.
“We have over 10,000 people who have already signed up for our payment platform,” Ipour noted. “… Our goal is that within the next 12 months we get to over 1 million users … and hopefully we can grow from there.”
Sterbcow pointed out to Hoppe that the adoption piece is probably the most difficult part of the whole equation. He asked Hoppe to share consumers’ initial reaction to the MegPrime payment platform.
“It doesn't feel like crypto,” said Hoppe, summarizing those early responses. “… It doesn’t feel like crypto because we are providing the on-ramp, off-ramp capability for the app, and so all I have to do is say, ‘Look, I’ve got a $2,000 a month payment that’s coming up on the 15th. I can move that from my checking account into the app. It’s sitting in USDC, so I’m not subject to the volatility. I can move it into the MegPrime Token at the same time that I’m logging into the management company portal and making my payment, so my volatility risk within that token is a matter of a minute, maybe two minutes at the most,” Hoppe added.
The consumers are, according to Hoppe, relaying that they’re “willing to take that risk” for the reward they’re receiving. A further piece of good news is that the token has been “very stable,” Hoppe added.
“(The feedback is) ‘this is great, this is what enabled me to come up with the money that I needed to close on this house, and the experience was just like opening up an account and funding it,” Hoppe said.
Sterbcow asked whether more companies were jumping into this market and questioned whether there was a bridge before anyone else can really jump in because they don't have the protections?
“I think at this stage everybody is looking at it as too good to be true. … It takes a little bit of time for them to believe that this thing would work.” Ipour said. “But we have confidence, we tested it, we know that it is working.”
Hoppe said he believes “massive adoption” of this model will come from merchants and vendors.
“We're sidelining all of the traditional credit card payment fees that exist,” Hoppe said. “I think partnership adoption grows quite a bit as a result of that, and that’s another one of the major benefits of utilizing blockchain and cryptos.”
Ipour said he anticipates announcing the names of partners that are joining the platform once the company has about 25,000 to 30,000 users.
Finally, Sterbcow asked about the future and wanted to know where this company, or even the industry, will be in 10 years?
Ipour said they are currently going through a process of adopting and validating the system; the next step is adoption on a larger scale. Within the next 10 years, Ipour said he would like to see more than 50 million Americans using the MegPrime platform for homebuying.
“If you can truly provide the value proposition that helps people (not) become renters for rest of their life, I think that’s what makes me happy,” Ipour said.