Real Estate

Bitcoin steps up from sandwiches to villas

Leslie Shaffer | Writer for
Buying property with bitcoins
Buying property with bitcoins

Acceptance of bitcoin, a sometimes maligned virtual currency, has stepped up from small transactions for sandwiches and online dating to what may be its biggest deal yet: a luxury villa in Bali.

An unidentified buyer in Texas paid less than 1,000 bitcoins, worth more than $500,000, for a two bedroom, two bath luxury villa at Bali's Del Mango Villa Estate, in what may be bitcoin's largest transaction to date.

(Read more: This is what the future holds for bitcoin: Goldman)

"As far as we know, there's nothing that comes close to this," Alan Silbert, CEO of BitPremier, a website which lists luxury items for purchase with bitcoin, told CNBC. "There have been some luxury car sales – Tesla, Lamborghini. So I think this is by far the priciest item that's sold by bitcoins."

Bitcoin is a "virtual" currency that allows users to exchange online credits for goods and services. While there is no central bank that issues them, bitcoins can be created online by using a computer to complete difficult tasks, a process known as mining. Bitcoin has slowly been gaining greater acceptance for transactions, with businesses ranging from pizza parlors and hotels to online retailers allowing customers to use it for purchases.

Bitcoin or banks safer for money transfers?
Bitcoin or banks safer for money transfers?

The virtual currency may be used to buy more property ahead. BitPremier is listing several more properties on its site, including a luxury Paris property with a view of the Louvre at around 8.5 million euros ($11.8 million), or nearly 20,000 bitcoins, and a seven-bedroom luxury villa in Caesarea, Israel for around $3 million, or around 5,000 bitcoins.

Some are viewing the villa purchase as a sign that despite the recent collapse of a bitcoin exchange, the virtual currency is gaining broader acceptance.

(Read more: Despite recent woes, 'crypto currency' is the future, say SXSW attendees)

"It shows that it is a transaction mechanism," said David Moskowitz, a director at Coin Republic, which sells bitcoin. "It's being used as a means of exchange and people are willing to exchange their bitcoin."

Using bitcoin also allowed the transaction to be completed quickly, rather than waiting for multiple bank transfers. The actual bitcoin transfer was likely instantaneous, with the confirmation process to ensure the bitcoins weren't spent twice taking around 30 minutes to an hour, Moskowitz said. The cost of the transfer likely was less than $10, he said.

(Read more: Mind your wallet: why the underworld loves bitcoin)

To be sure, bitcoin's path toward respectability isn't entirely clear. Its value has fluctuated wildly, rising from around $13.00 at the beginning of 2013 to peak around $1,120 in November, according to data from bitstamp. It is currently trading around $600.

Recent high profile exchange failures have dented some confidence. Last month, one of bitcoin's major exchanges, Mt.Gox, went offline and then filed for bankruptcy, blaming hackers for stealing around $480 million worth of bitcoins, and earlier this month, a bitcoin bank was forced to close after hackers stole 896 bitcoins, worth over $600,000.

(Read more: Buffett blasts bitcoin as 'mirage': 'Stay away!')

Others also doubt that the virtual currency has intrinsic value.

"It's a mirage basically," legendary investor Warren Buffett told CNBC recently. "It's a method of transmitting money," he noted. "A check is a way of transmitting money too. Are checks worth a whole lot of money just because they can transmit money?"

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1