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Cryptocurrency, Crypto Assets, Crypto Mortgages
The first cryptocurrency came into existence during the late 2000s. Developed in response to distrust of large banks and their contributions to the Great Recession, Bitcoin and blockchain, its trading network, promoted peer-to-peer financial transactions and trades without interference from third parties.
Fast-forwarding a little more than a decade, cryptocurrency has exploded as a medium of exchange and an investment asset. Crypto also finding its way into real estate financing. Blockchain real estate platform Propy and crypto wallet service Abra just announced the Abra Borrower platform, allowing loan applicants to use their crypto as collateral to borrow U.S. dollars that can buy real property.
“While digital asset investment has skyrocketed, many investors are still unable to use their cryptocurrency holdings to directly fund the most important purchases in life, like property,” said Abra CEO Bill Barhydt in a statement.
Earlier this year, Propy spearheaded the sale of a Gulfport, FL home, which was auctioned off as a non-fungible token (NFT). The buyer agreed to pay $654,310 (roughly 210 Ethereum) for the property, which was the first tangible real estate to be “minted” as an NFT. Propy is planning similar residential sales.
LoanSnap has a crypto-mortgage program that connects a real-world mortgage lien to an NFT. Meanwhile, mortgage lender Milo allows borrowers to pledge their crypto as collateral for an actual mortgage; the company recently provided a 30-year Bitcoin mortgage for the purchase of a Miami duplex. The company indicated that early response has been so overwhelming, it’s increasing the size of its staff to meet demand.
Crypto mortgages are similar to traditional mortgages and are provided in U.S. dollars. They’re geared specifically toward cryptocurrency holders who don’t want to sell out or convert their digital stash. Borrowers are required to pledge crypto approximate to the value of the property. Once the loan is approved, digital coins are transferred to a custodian for safe-keeping. If the crypto’s value falls, the borrower might have to put up more crypto or other types of collateral.
Borrowing against crypto reserves isn’t new. But until recently, those with large crypto holdings who didn’t want to sell their digital coins turned to companies such as BlockFi, which offered collateralized loans, but at somewhat higher interest rates. While crypto mortgages seem to be gaining some traction, there are skeptics who share concerns about the asset’s lack of regulation and volatility. Additionally, “Integrating the legacy mortgage system with the new crypto environment is an operational nightmare,” Miami, FL attorney Lorenzo Delzoppo told the Wall Street Journal. Delzoppo, who is consulting with cryptofinance company XTBO on its crypto mortgage product, also commented that the current scenario is “incredibly exciting.”
- ◦Sale/Acquisition
- ◦Financing
- ◦Economy
