In March of this year, U.S. cryptocurrency exchange platform Coinbase (COIN) and mortgage lender Better Mortgage (BETR) announced the successful completion of the first mortgage loan backed by Bitcoin (BTC) and the U.S. dollar stablecoin USD Coin (USDC) and supported by Fannie Mae. Homebuyers do not need to pay their down payment in cash; instead, they can use their holdings of Bitcoin or USDC as collateral to obtain the loan.
Better stated that 41% of its pre-approved customers, despite having credit and income that meet mortgage requirements, lack the cash needed for a traditional down payment. Allowing younger homebuyers to use their digital assets as collateral is expected to reduce this percentage.
This concept sounds quite speculative, but a couple in Michigan recently completed the first Bitcoin-backed mortgage loan in the United States through Better and Coinbase. In this transaction, Coinbase holds the couple’s digital tokens as collateral, while Better provides the mortgage funds. The two companies plan to roll out this type of loan to more eligible borrowers across the country this summer.
The concept of obtaining a loan using investment assets as collateral is not new. Homebuyers who hold significant stocks but lack cash can use a “pledged asset mortgage” (PAM), pledging a portion of their stock portfolio to the lender instead of making a cash down payment.
Thus, Coinbase and Better are simply extending this idea to the cryptocurrency space. According to data from the FINRA Investor Education Foundation, Gen Z and younger millennials in the United States tend to hold more cryptocurrency than stocks. This means that loans backed by Bitcoin and stablecoins could attract significant interest from these younger investors.
Coinbase and Better are not the first companies to attempt Bitcoin-backed mortgages. However, earlier products did not receive Fannie Mae’s backing and were tightly linked to Bitcoin’s price volatility. If Bitcoin’s price plummeted, borrowers faced the risk of margin calls. In contrast, the loan products from Coinbase and Better do not trigger margin calls because they use a dual-loan structure: one traditional loan covering the full home price, and one token-based junior loan covering only the down payment. The second loan is intentionally over-collateralized—250% over-collateralization for Bitcoin and 125% for USDC—to withstand market fluctuations.
This design indeed gives the product a significant advantage. However, it may only appeal to a small subset of specific crypto investors: those who hold tens of thousands of dollars in Bitcoin or USDC, are unwilling to liquidate those assets, and are simultaneously looking for a new home.
Overall, crypto-backed mortgages offer an intriguing glimpse into the future: Bitcoin, stablecoins, and other cryptocurrencies could potentially serve as collateral for new home purchases. But investors should not conclude that more people will directly buy entire homes with cryptocurrency. This model is still limited to a specific group of investors, and its widespread adoption will take time to materialize.
