Putting Your Crypto Holdings to Work as Collateral

Real estate buyers can use crypto as collateral rather than selling it to fund the property purchase, says Troy Huerta, the CEO of ByBrix.

Following months of sky-high home prices, the US real estate market could be on the verge of a shift. Fed Chair Jerome Powell noted last week that activity in the housing sector has weakened.

Conversely, Powell’s move to hike interest rates yet again has sent the prices of major cryptocurrencies upward. It is a sign of cautious optimism for cryptocurrency markets, which have faced their own periods of heightened volatility in recent months. 

Though on potentially divergent trajectories, what these seemingly dissimilar sectors do share in common is opportunity. Namely, now more than ever, the real estate market provides significant upside for crypto investors to enter the underserved crypto-mortgage market. They can utilize their digital assets to purchase real estate.

Real Estate and Crypto

Longtime cryptocurrency investors who have accumulated crypto assets over the years have weathered many storms. This is including some of the turbulence presently facing the market. Now is probably not the time to sell crypto. But savvy individuals should nonetheless find the means to put their crypto wealth to work. Some types of crypto mortgages enable investors to use that crypto as collateral for a house purchase. 

Increasingly, industry participants are building the infrastructure needed to facilitate these types of transactions. It will allow crypto holders to maximize the potential of their holdings. ByBrix is one such organization. It is a newly launched joint venture between crypto web application Blimp Homes and DeFi incubator AQRU. ByBrix will collateralize digital assets and enable them to be used in property purchases across the UK, Canada, Australia and the US. 

Crypto as Collateral

Real estate buyers can use cryptocurrency as collateral rather than selling it to fund the property purchase. The buyer is then able to continue to benefit from any future uplift in the value of their cryptocurrency investment. And, they can avoid the cost of selling their cryptocurrency, as well as any potential capital gains tax liability. The cryptocurrency is held securely – as cryptocurrency rather than being liquidated into fiat currency. Then, it is returned to the user in full when the borrowing is repaid.

With this solution, the crypto is held as collateral for the down payment on the property purchase. A traditional mortgage on the property itself (supplied by specialist providers via ByBrix) is used for the balance of the property purchase. This keeps the collateralized cryptocurrency separate from the borrowing on the property. This means that in the worst-case scenario of the property being foreclosed on, the collateralized cryptocurrency is not impacted. 

Ultimately, the opportunity inherent in cryptocurrency mortgages will require significant education across both real estate and digital asset industries. The mechanics of these instruments are nuanced. All stakeholders – from potential borrowers looking to make use of their crypto wealth, to intermediaries such as brokers, and even to regulators – will need time and help to adopt this new way of thinking. In the same way that cryptocurrencies have reshaped our very definitions of what money and currency are, crypto mortgages can redefine value propositions across the real estate industry. 

About the Author

Troy Huerta is CEO of ByBrix, a provider of funding for property purchases collateralized by cryptocurrency holdings.

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