Crypto for a home? Coinbase brings token-backed down payments to housing market

In a photo taken by drone, Vancouver homes in the Kitsilano neighbourhood of Vancouver are pictured. THE CANADIAN PRESS/Jonathan Hayward

Coinbase is teaming up with Better Home & Finance to let homebuyers pledge their crypto holdings as collateral for down payments, marking one of the most ambitious attempts yet to adapt digital assets for mainstream needs.

A prospective homeowner will be able to secure a loan against the bitcoin or USDC in their Coinbase account to cover the down payment, the companies said on Thursday. The loan will be separate from the Fannie Mae-backed mortgage on the home.

The move will free homebuyers from having to sell their crypto to fund their downpayments, which is typically done via cash and cash equivalents.

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Customers could hold on to their assets for longer, potentially benefiting from further price gains and deferring tax liabilities.

It could also temper longstanding criticism that crypto assets have little practical utility.

“This product is designed to work within the safeguards of the existing mortgage system, including how risk like asset volatility is managed,” Kara Calvert, head of U.S. policy at Coinbase, told Reuters.

However, the approach adds complexity and leverage to an already expensive purchase. In effect, buyers would be wagering that preserving crypto exposure justifies taking on a second loan alongside one of the biggest financial commitments of their lives.

Access to homeownership has tightened in recent years as elevated borrowing costs, high prices and constrained supply have pushed the median age of first-time buyers to 40, versus 32 in 2000, data from the National Association of Realtors shows.

The mortgages will be originated and serviced by Better.

From fringe to mainstream

The pro-crypto Trump administration has taken several steps to ease regulatory hurdles that have long constrained its expansion into traditional financial products.

Last year, the White House ordered regulators to expand access to alternative investments, including crypto, in retirement savers’ 401(k) plans.

On the campaign trail for the 2024 presidential election, Trump promised to make the U.S. the world’s “crypto capital.”

“We maintain an active, bipartisan dialog with Washington,” Coinbase’s Calvert said on crypto regulation, adding the company’s product will expand homeownership access for Americans whose wealth does not sit in traditional accounts.

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Coinbase said its crypto-backed mortgages function just like a conventional home loan, with the same legal protections.

A company spokesperson said the mortgage terms and interest rates will remain unaffected by bitcoin’s price fluctuations once the loan is active.

There will also be no margin calls even if the value of the pledged crypto falls, as long as the owner keeps up with payments, the spokesperson added.

(Reporting by Manya Saini and Niket Nishant in Bengaluru; Editing by Krishna Chandra Eluri)