The Federal Housing Finance Agency’s (FHFA) recent directive to integrate cryptocurrency into mortgage risk assessments marks a pivotal shift in housing finance, emphasizing the need to recognize self-custodied digital assets.
This approach could enable long-term crypto holders to leverage their digital wealth for mortgage qualification without liquidating assets, provided the framework respects the unique nature of crypto custody.
According to Margaret Rosenfeld, chief legal officer of Everstake, “Verifiability must be the standard, not a specific custody model,” underscoring the importance of including self-custody in regulatory considerations.
FHFA’s crypto mortgage directive urges inclusion of self-custodied assets, promoting verifiability and security in mortgage risk assessments for digital asset holders.
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The FHFA’s directive explicitly calls for digital assets to be “capable of being evidenced and stored on a US-regulated, centralized exchange,” a phrase often misunderstood as mandating exclusive custody on such platforms. However, the emphasis lies on verifiability and regulatory compliance rather than custody exclusivity. This distinction is critical, as it opens the door for self-custodied assets to be recognized in mortgage underwriting, provided they can be reliably verified through transparent, auditable means.
Self-custody is foundational to the cryptocurrency ecosystem, offering enhanced security and transparency compared to centralized exchanges. Unlike custodial platforms, which carry inherent counterparty risks—as evidenced by recent exchange collapses—self-custodied assets benefit from onchain auditability and reduced single points of failure through cold storage and non-custodial wallets. Third-party verification tools further bolster confidence in ownership claims, making self-custody a viable and secure option for mortgage risk assessment.
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Source: https://en.coinotag.com/fhfa-directive-on-bitcoin-in-mortgage-risk-assessments-may-overlook-self-custodied-assets-and-increase-counterparty-risk/