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This summer, cryptocurrencies moved into new territory in Spain when a bill was introduced that would allow borrowers to pay their mortgages using the digital assets. The proposed legislation, aimed at deepening the acceptance, use and regulation of digital currencies, would also allow the real estate industry to invest in mortgage pools using crypto and encourage banks to use blockchain technology to keep track of mortgages and insurance.

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Spain is further along than Canada in contemplating the incorporation of crypto into daily financial affairs, but it is hard not to wonder whether it is just a matter of when — not if — crypto mortgages become a reality here.

Rob McLister, mortgage editor at RATESDOTCA, told the Financial Post that a future in which lenders accept cryptocurrencies not only for mortgages, but for all kinds of payments, is easy to envision.

“There’s certainly going to be lenders that allow people to pay the mortgage with crypto, and that would be converted into cash because lenders generally raise funds from someplace to lend out,” McLister said in an interview with the Financial Post. “They have to pay the sources of those funds, be they investors, securitization, what have you.”

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But he doesn’t expect to see the option offered anytime soon, given the lack of broader acceptance and use of crypto here.

“I don’t think that there’s enough demand,” McLister said. “There’s just not enough Canadians with enough money in their crypto account to make mortgage payments. So, I don’t see lenders rushing to offer this option.”

Crypto’s underlying blockchain technology, however, may be another story. McLister said it could be more of a game-changer in real estate if it gets used for registering land ownership and mortgages, revamping the existing outdated system.

One real estate company flirting with crypto mortgages is broker Matrix Mortgage Global, which announced in early April that it would begin accepting bitcoin, bitcoin cash, Ripple’s XRP, Ethereum and a few dollar-pegged stablecoins as payments for deposits or down payment portions. Matrix’s plan is to convert the crypto into fiat currency on the day it is received.

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Shawn Allen, Matrix Mortgage’s founder, told the Financial Post that he’s received many inquiries on this announcement — but no takers yet.

“We haven’t had anyone actually go through with it because of the tax implications,” Allen said. “They thought that they would just be able to use crypto and then we wouldn’t report it.”

Allen added that while he believes that the crypto mortgage concept is a ways away, when it does materialize it will likely involve payments through dollar-pegged stablecoins, a form of digital currency that attempts to mirror the value of cash.

“I think this is where the stablecoins are going to come in,” Allen said. “Because what people would generally do is convert their (ethereum), or their Doge, or their Bitcoin … to a stablecoin so that it’s more palatable to transact without the varying price fluctuations.”

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Ronny Tome, chief executive officer at Ducatus Coin, thinks using cryptocurrencies for practical purposes such as paying down mortgages is one piece of the overall “crypto economy” that will one day become a reality.

Like Allen, he said stablecoins are a more likely candidate for widespread use in the mortgage space because of the risk of volatility and transaction fee with other currencies.

“I don’t think it’s an issue of the price when it comes to bitcoin in the retail space, or bitcoin as a currency. The problem is the transaction fee,” Tome said. “If you want to go and pay for coffee in Starbucks and the coffee is $5, but your transaction fee is $5, or $10, or $20 then you’re not going to use your bitcoin.”

Crypto holders will likely prefer to hold their positions in the market rather than cash out. If they do decide to spend their coins, it will more likely be on big-ticket luxury items where the transaction fee would make more sense, he said.

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Tome said it’s difficult to determine what crypto mortgages would look like, but he foresees a global adoption where digital currencies will be used for commonplace purposes. Switzerland, for example, is already a leader in crypto adoption, allowing citizens to pay taxes and some of their bills with digital coins.

“For me, any kind of adoption in any field is a step forward,” Tome said. “I think when we really make it to mortgages being payable in the crypto space or with cryptocurrency being accepted officially by banks, by credit institutions, then that will be a huge step forward.”

Financial Post

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