When Crypto Assets Become Mortgage Collateral: The Triangular Dilemma of Regulation, Cost, and Tokenized Equity
When Crypto Assets Become Mortgage Collateral: The Trilemma of Regulation, Cost, and Tokenized Rights
Better, in partnership with Coinbase, has launched a mortgage solution allowing borrowers to pledge Bitcoin or USDC as collateral. This facilitates two loans: a primary, Fannie Mae-compliant mortgage and a separate private loan for the down payment, secured by the crypto assets and a second lien on the property. The product targets asset-rich but cash-poor buyers, with high collateral requirements (250% for Bitcoin, 125% for USDC) and no margin calls.
The initiative has drawn significant regulatory scrutiny. Seven U.S. Senators, led by Dick Durbin and Elizabeth Warren, sent a letter to the FHFA urging a halt, arguing the high collateral ratio itself acknowledges crypto's risk and that combined loan costs could be 1.5 percentage points higher, potentially burdening taxpayers.
Despite criticism and Bitcoin's price volatility, Better's CEO Vishal Garg plans to expand support to tokenized equities (e.g., Tesla, SpaceX) and envisions using retirement accounts to help family members buy homes. A core challenge for tokenized assets is clarifying the legal rights conferred by holding such tokens.
To reduce costs, Better partnered with Framework Ventures, aiming to lower capital expenses by over 100 basis points and offer sub-5% rates. While the company posted a loss in Q1 2025, it reports strong demand, with a waitlist representing ~$250M in potential loans. Garg remains committed to the model, viewing it as a key channel for integrating digital assets into the banking system.
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