- Crypto-backed mortgages are contentious.
- The reality is more nuanced, a financial expert says.
- “The risk is mostly around mis-selling."
When Fannie Mae, a US government-sponsored enterprise that buys mortgages from lenders, announced plans at the end of March to accept crypto-backed mortgages for the first time, it elicited an uproar.
Supporters lauded the move as more proof of crypto’s growing legitimacy and real-world use, while digital asset detractors warned that mixing Bitcoin with the $55 trillion housing market could spark another financial crisis.
The reality is more nuanced, Sean Tuffy, a financial regulation expert, told DL News.
“It's not really a Bitcoin mortgage as much as it is a bit of financial engineering,” Tuffy said. “The irony of products like this is that they only typically make sense for those who probably could afford a house in the first place.”
Since US President Donald Trump took office in January 2025, his administration had gone above and beyond to promote and legitimise cryptocurrencies and the fledgling industry built around them.
Trump has declared crypto and blockchain a national priority, helped advance digital asset legislation, and appointed industry-friendly figures to lead the country’s regulatory agencies.
Bitcoin-backed mortgages are another in a long list of pro-crypto pushes. They’re the brain child of William Pulte, a Trump ally who has received strong public praise from the President.
Pulte was appointed as the director of the Federal Housing Finance Agency in March last year. In June, he ordered Fannie Mae to prepare its businesses to count crypto as a mortgage-backing asset.
How Bitcoin mortgages work
Crypto-backed mortgages will be offered via a new product from Better Home & Finance and Coinbase Global.
They work by first offering a cash loan against a prospective home buyer’s crypto. The borrowed funds are then used for the down payment on the house.
Is it any riskier than existing forms of pledged asset mortgage? Not really, according to Tuffy.
“The risk is mostly around mis-selling and borrowers taking on more leverage than they should or, frankly, need to,” Tuffy said.
Still, others argue that crypto-backed mortgages are fundamentally bad news.
“This is an absolutely terrible idea, even reading the fine print,” Tom Dunleavy, head of venture at Varys Capital, a crypto venture firm, said shortly after the announcement.
“They underwrite a total dollar amount loaned, the quality of the asset (home) and your ability to pay. This drastically makes two of these three at a much higher risk profile than almost any type of borrower.”
Pledged asset mortgages aren’t a new concept. But they’re a niche product, usually only advertised to savvy investors with high incomes.
That’s because they increase the amount of leverage taken on by homebuyers. In other words, they’re more risky.
If the value of a homebuyer’s pledged crypto declines, it could lead to a margin call, requiring them to deposit additional assets or repay the loan.
If this happens, the borrower could lose both their home and their assets.
“As with any securitisation product, it’s probably only appropriate for a pretty narrow segment of affluent Bitcoin holders,” Tuffy said.
Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.
