US Regulator Considers Mortgage Secured by Cryptocurrencies
Fannie Mae and Freddie Mac, mandated by FHFA Director William Plute, are being instructed to evaluate cryptocurrencies like Bitcoin and Ethereum as acceptable mortgage collateral.
Controversial Directive
Federal Housing Finance Agency (FHFA) Director William Plute issued the directive, aligning with President Trump’s goal of establishing the U.S. as the global crypto hub. However, analysts warn this could introduce significant risk into a vital segment of the U.S. housing market.
Despite growing institutional interest, cryptocurrencies remain substantially riskier than traditional assets due to their inherent volatility. A Fidelity report highlights Bitcoin’s fourfold higher volatility compared to large-cap stock indexes over recent years.
Crypto-secured mortgages are not unprecedented. In 2022, startup Milo Credit allowed customers to use Bitcoin and Ethereum to finance home purchases, offering a tax-efficient alternative to cashing out.
The decision sparks debate within the industry. While regulatory clarity on recognized assets is evolving, the potential inclusion of volatile “joke tokens” traded on major exchanges raises concerns about asset quality.
Some crypto advocates view Plute’s order as a “defining moment” for institutional adoption. However, critics drew parallels to the lax lending standards preceding the 2008 financial crisis, cautioning against legitimizing high-risk assets crucial to the nation’s economic stability.
Plute’s directive specifies consideration of “cryptocurrency assets evidenced and stored on a US-regulated centralized exchange,” encompassing a diverse range of assets. Experts highlight both the emergence of high-quality institutional-grade crypto assets and concerning tokens, whose securities status remains ambiguous according to recent SEC guidance.
This potential shift, viewed by some as tacit acknowledgment of crypto’s expanding role in balance sheets where even BlackRock advocates small allocations, represents an early experiment with significant implications for future regulation globally.
