If approved, the move could allow crypto holders to use assets like Bitcoin for home purchases, avoiding taxable events from selling digital assets.
Welcome to the US Crypto News Morning Briefing — your essential rundown of the most important developments in crypto for the day ahead.
Grab a coffee for an interesting read, as crypto might be coming to your mortgage. The US housing regulator is now exploring how crypto could qualify as collateral in home loan applications, signaling a potential shake-up in how Americans buy homes in the digital age.
BeInCrypto’s recent US Crypto News coverage highlighted Bitcoin’s growing appeal relative to treasuries or bonds. Now, regulators are looking at crypto for mortgage collateral in America.
Bill Pulte, director of the US Federal Housing Finance Agency (FHFA), announced that the regulator will begin studying how cryptocurrency holdings might be used to qualify for mortgages.
While Pulte’s commitment signals a potential policy shift, specifics on implementation remain unclear for now.
However, with crypto-backed mortgages, borrowers can use digital assets like Bitcoin as collateral instead of selling them for fiat. In practice, borrowers deposit their crypto with a lender, who locks it up during the loan term.
In return, borrowers receive a fiat mortgage to purchase a home, with the crypto as a secured backing. Borrowers retain crypto ownership if repayments are made on time and the collateral value holds.
Notwithstanding, the move represents a notable shift for the FHFA, which oversees major entities such as Fannie Mae, Freddie Mac, and the Federal Home Loan Banks.
However, volatility remains a key risk. If Bitcoin or another asset used as collateral drops significantly in price, the borrower may face a “margin call.” This would require them to top up their collateral to avoid liquidation.
“IMO, stablecoins should absolutely be considered as equity for potential mortgage applicants. Volatile assets probably shouldn’t be,” a user challenged.
Against this backdrop, Michael Saylor proposed the MicroStrategy (now Strategy) Bitcoin Credit framework, cognizant of this risk-reward model.
Offering to share his firm’s proprietary Bitcoin Credit Model with Pulte’s FHFA, Saylor highlighted that several factors are considered when generating statistical BTC Risk and BTC Credit spreads.
Based on Saylor’s post, MicroStrategy’s Bitcoin credit model calculates credit risk using Bitcoin price volatility and loan duration, among other factors.
This model could transform mortgage eligibility for crypto holders, potentially bypassing restrictions by Fannie Mae and Freddie Mac, as noted in a 2024 study from the Journal of Financial Regulation.
Meanwhile, and traditionally, using crypto for a home purchase requires selling assets, which triggers a taxable event in the US.
Selling Bitcoin or Ethereum incurs capital gains tax, up to 37% for top earners when including federal and state taxes, particularly in states like California. Buyers can avoid realizing gains and deferring taxes by using crypto as collateral instead of selling it.
It is worth noting that Coinbase already allows users to borrow USDC using Bitcoin as collateral, avoiding asset sales and tax implications.
If the FHFA approves the inclusion of crypto holdings in mortgage assessments, it could gain popularity among high-net-worth investors, potentially legitimizing crypto as a financial asset in federal housing policy.
“When I bought a house last year, I provided a portfolio summary from DeBank as proof of funds. No bank would accept such a document but realtors will accept the document for cash offers,” the same user remarked.
More closely, for retail, the move could unlock new pathways for them to participate in the American Dream without sacrificing their long-term investment positions.
Elsewhere, investor Charlie Bilello highlighted that the monthly mortgage payment for purchasing a median-priced home in the US has soared by 89% over the past five years.
Here’s a summary of more US crypto news to follow today:
