As cryptoassets continue to become increasingly integrated into mainstream financial conversations, financial markets, and are adopted by financial institutions, it is simply a matter of time before more sophisticated financial instruments make their debut.
One such instrument that might be flying under the collective radar of market participants, however, is the potential for bitcoin and other cryptoassets to play a role in the mortgage and broader debt-collateralization space.
From straight forward cases of individuals buying real estate using cryptocurrencies, to NFTs playing a role in reducing paperwork linked to title and title insurance, to blockchain serving a key role in the record keeping process, the implications for real estate are substantial.
NFTs have a very real role to play in tokenizing the ownership of real estate assets, and are already moving far beyond simply being relegated to crypto art speculation.
Neither mortgages nor crypto are a simple market to understand, and especially when combining complex topics it is critical that the specific details of every transaction are examined.
For example, there are options that require 100% of the requested financing to be collateralized by crypto holdings; a $1 million mortgage loan would require $1 million of crypto as collateral.
On top of the borrowing specifics, investors and borrowers should also research the process that occurs if the value of collateral drops below a pre-determined level.
Custody matters.
For example, if a crypto investor chooses to not only collateralize a mortgage using cryptoassets, and therefore transfers custody to some external party, but also documents this transaction using an NFT, understanding provenance and custody are essential.
There are several underlying use cases that different types of blockchain-based applications can bring in order to improve the current state of real estate transactions.