Property buyers can use crypto as collateral instead of selling it to finance the property purchase, says Troy Huerta, CEO of ByBrix.
After months of soaring home prices, the US real estate market may be on the verge of a shift. Fed Chairman Jerome Powell noted last week that activity in the housing sector has weakened.
Conversely, Powell’s move to raise interest rates has once again sent prices of major cryptocurrencies soaring. It’s a sign of cautious optimism for cryptocurrency markets, which have faced their own periods of increased volatility in recent months.
Although on potentially divergent trajectories, there are opportunities that these seemingly disparate sectors share in common. Namely, now more than ever, the real estate market offers significant upside for crypto investors to enter the underserved crypto mortgage market. They can use their digital assets to buy real estate.
Real estate and crypto
Long-term cryptocurrency investors who have accumulated crypto assets over the years have weathered many storms. This includes some of the turbulence that the market is currently facing. Now is probably not the time to sell crypto. But savvy individuals should still find means to put their crypto wealth to work. Some types of crypto loans allow 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 such an organisation. It is a recently launched joint venture between crypto web application Blimp Homes and DeFi incubator AQRU. ByBrix will pledge digital assets as collateral and enable them to be used in property purchases across the UK, Canada, Australia and the US.
Crypto as security
Property buyers can use cryptocurrency as collateral instead of selling it to finance the property purchase. The buyer can then continue to benefit from any future increase in the value of their cryptocurrency investment. And they can avoid the costs of selling their cryptocurrency, as well as possible capital gains taxes. The cryptocurrency is held securely – as cryptocurrency instead of being liquidated into fiat currency. It is then returned in its entirety to the user when the loan has been repaid.
With this solution, the crypto is held as security for the down payment on the property purchase. A traditional mortgage on the property itself (provided by specialist suppliers via ByBrix) is used for the balance of the property purchase. This keeps the secured cryptocurrency separate from the loans on the property. This means that in the worst case where the property is foreclosed, the secured cryptocurrency is not affected.
Ultimately, the opportunity inherent in cryptocurrency lending will require significant education across both real estate and digital assets. The mechanics of these instruments are nuanced. All stakeholders – from potential borrowers looking to spend 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, cryptoloans can redefine value propositions across the real estate industry.
About the author
Troy Huerta is the CEO of ByBrix, a provider of real estate financing backed by cryptocurrency holdings.
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