Best Guide to Accessing Cryptoasset-Backed Mortgages in 2023

In 2023, the concept of cryptoasset-backed mortgages has emerged as a novel way to bridge the gap between digital currency and conventional home loans. These mortgages provide an unconventional avenue for individuals to access funds while leveraging digital assets. Mortgage holders can benefit from things like increased liquidity and reduced tax liability thanks to these advantages.

This article discusses how cryptoasset-backed mortgages work, how they are created, and more.

Understanding Cryptoasset-Backed Mortgages

In the conventional mortgage setup, borrowers secure a loan from a financial institution like a bank to acquire a property. In this arrangement, the property itself acts as collateral for the loan. Lenders have the legal right to foreclose on properties where borrowers have fallen behind on their mortgage payments.

In contrast, cryptoasset-backed mortgages revolve around utilising digital currency as collateral to obtain a loan, providing cryptoasset holders a means to access funds without liquidating their digital assets.

Mechanisms Behind Cryptoasset-Backed Mortgages

Cryptoasset-backed mortgages allow individuals to use their digital assets, like Bitcoin or Ethereum, as collateral for securing loans to purchase assets such as property. The process hinges on blockchain technology and smart contracts, ensuring transparency and efficiency.

Below is a breakdown of the operational framework of cryptoasset-backed mortgages:

  1. Asset Evaluation: It starts with assessing the chosen digital currency's suitability as collateral. This assessment considers the asset's market value, liquidity, and volatility.
  2. Smart Contract Creation: A smart contract outlining crucial details like loan amount, interest rate, repayment schedule, and collateral requirements is generated on the blockchain.
  3. Collateral Locking: This involves the borrower transferring the specified amount of digital currency to a designated wallet address under the lender's control. This collateral is held in escrow for the mortgage's duration, ensuring security.
  4. Loan Disbursement: Upon verifying the collateral, the lender disburses the loan amount, usually in traditional fiat currency, to the borrower.
  5. Loan Repayment: The borrower commences repaying the loan based on the predetermined schedule specified in the smart contract. The lender retains the digital currency collateral during this period.
  6. Collateral Release: After successfully meeting the repayment obligations, the smart contract autonomously releases the digital currency collateral back to the borrower's wallet, completing the transaction.

Advantages Offered by Cryptoasset-Backed Mortgages

Cryptoasset-backed mortgages have many advantages, including:

  1. Access to Liquidity: Cryptoasset-backed mortgages empower digital currency holders to access liquidity without divesting their digital assets, which proves advantageous, especially during digital currency price volatility phases.
  2. Diversification: Borrowers can diversify their investment portfolio by using their digital currency holdings to acquire traditional assets, such as real estate, without converting their cryptoassets into fiat currency.
  3. Efficiency and Transparency: By leveraging blockchain technology and smart contracts, the mortgage process gains transparency, reduces reliance on intermediaries, and streamlines operational efficiency.
  4. Tax Benefits: One of the most significant advantages of a cryptoasset-backed mortgage is that holders can use their digital currency as collateral without selling. Consequently, holders can avoid tax implications related to asset sales while capitalising on potential future value appreciations.

Challenges and Considerations

While cryptoasset-backed mortgages are a novel financial tool, they are not without challenges and considerations:

  1. Volatility Risk: Digital currency markets are renowned for their price volatility. Margin calls or collateral liquidation might occur if the value of the collateral drops significantly.
  2. Regulatory Uncertainty: The regulatory framework surrounding digital currencies and blockchain technology varies significantly across jurisdictions, necessitating both borrowers' and lenders' careful navigation of legal complexities.
  3. Security Concerns: Although blockchain technology enhances security, the risk of hacks or breaches persists, potentially jeopardising the collateral.

Learn More About Cryptoasset-Backed Mortgages

Cryptoasset-backed mortgages serve as a captivating intersection of contemporary finance and digital innovation. These mortgages usher in a new era of financial possibility by tapping into the power of blockchain and digital currency to offer borrowers new ways to gain access to capital and diversify their investment portfolios.

If you are keen to learn more about cryptoasset-backed mortgages, please contact us to arrange a meeting.


XEROF is a Swiss-licensed FinTech specialising in cryptoassets. Our Tier 1 banking network allows clients to seamlessly navigate crypto and fiat transactions to manage investments, treasury, and settle third party expenses.

Learn more about XEROF