U.S. crypto-backed mortgages gain traction as lenders test bitcoin collateral

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U.S. crypto-backed mortgages

Highlights

U.S. mortgage lenders Better and Coinbase launched a bitcoin-backed mortgage product after FHFA policy changes, attracting thousands to a waiting list, 36 percent with over $500,000 in crypto.
A borrower recently funded a $130,000 house deposit using a bitcoin-backed loan with a 7.5 percent 30-year interest rate, avoiding selling their coins.
European and UK regulators remain cautious, with no official crypto mortgage product yet backed and new UK crypto lending rules set for next year amid $1 billion in global crypto thefts in H1.

Policy support and early product rollout

As reported by Financial Times, U.S. officials have recently encouraged a broader role for cryptocurrency in home finance, helping lenders and crypto firms bring bitcoin-backed mortgage products to market.

Bill Pulte, director of the Federal Housing Finance Agency, last year ordered mortgage giants Fannie Mae and Freddie Mac to prepare their businesses to count cryptocurrency as an asset for a mortgage. That move helped pave the way for Better and Coinbase to launch a product that lets borrowers use bitcoin as collateral for a housing deposit while also taking out a conventional dollar mortgage secured against the home.

Better chief executive Ziggy Jonsson says thousands of people have joined the waiting list since the offering launched, with 36 per cent holding more than $500,000 in crypto. The company only accepts bitcoin for now, though it may expand to ether and solana in future.

One borrower, identified only as Jonathan, says he used a $130,000 loan backed by bitcoin to fund a house deposit this summer. He says the structure allowed him to avoid selling coins that he expects to rise in value over time, while paying 7.5 per cent over 30 years on both the crypto-backed loan and a separate mortgage.

Risks limit UK and European prospects

Supporters argue that crypto-backed mortgages can serve high-earning borrowers whose wealth is concentrated in digital assets rather than cash savings. But the structure also exposes lenders and borrowers to concerns over collateral values, underwriting standards, hacking and the source of crypto wealth.

In Europe and the UK, borrowers can already raise loans against crypto holdings in some cases, and some private banks may count those assets in broader wealth assessments. Still, no specific crypto mortgage product has won official backing comparable to the U.S. approach, and regulators remain more cautious about integrating digital assets into mainstream finance.

The UK's crypto rules, due to come into force next year, will regulate the sector including over-collateralised crypto loans. The European Banking Authority said in September that EU officials should also regulate crypto lending because of risks to consumers, while the UK regulator continues to warn that crypto is volatile and investors could lose all their money.

Industry participants say demand exists among wealthy clients in London, Dubai and other markets, but a government-supported UK version appears unlikely in the near term. Critics in the U.S. are also pushing back, arguing that linking crypto wealth to taxpayer-backed housing finance could send the wrong signal to would-be homeowners.

Large banks in the U.S. have so far stayed away from issuing crypto-backed loans, reflecting concerns about risk management and compliance. Blockchain analysis group TRM Labs says hackers stole nearly $1 billion in crypto globally in the first half of this year, while European anti-money laundering officials have described digital assets as highly exposed to illicit finance risks.

In our earlier article on the Bank of England’s push for “bare metal” recovery planning, we explained how UK regulators want major banks to maintain independent fallback systems to keep critical services running if core technology is compromised. The report highlighted warnings that AI is raising the scale and complexity of cyber attacks, prompting supervisors to demand stronger operational resilience across the financial system.

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