Last year, mortgage giant Fannie Mae signaled a major turning point in the mainstreaming of cryptocurrency when they started allowing cryptocurrency to be used for the down payment of a home. While cryptocurrency had been embraced by the tech community almost immediately after the first decentralized cryptocurrency was created in 2009, it has been slow to take on the role of real currency that can be used to pay for goods and services. It has typically been held as an investment that would eventually need to be converted to dollars, Euros, or any other type of conventional currency in order to be spent.
Up until recently, digital assets meant very little to mortgage lenders. Meanwhile, people who were holding cryptocurrency were reluctant to use it for real estate. This is due to the capital gains taxes they would incur upon selling and also because most crypto holders see it as a long-term investment. Exiting from their crypto holdings would mean losing out on a lot of long-term appreciation.
Now, the tides seem to be turning when it comes to accepting cryptocurrency for real estate purchases. Fittingly, this shift is really taking hold in the white-hot south Florida real estate market. Milo Credit is the Miami-based startup that is financing mortgages while allowing borrowers to hold on to their cryptocurrency, which they pledge as collateral. This arrangement allows borrowers to keep their tokens, and more importantly, spares them the expense of a capital gains tax.
Milo offers 30 year fixed-rate mortgages, just like a traditional lender. The company is planting the seeds for what they believe will be an increasingly common way to finance real estate. Their goal is to eventually pool their loans to sell them to banks or asset managers, according to the company’s founder, Josip Rupena.
This startup is not the only way that the south Florida real estate market is embracing crypto. Miami has become a major hub of the crypto industry, with MoonPay and Blockchain.com setting up offices in the city’s Wynwood neighborhood. This has led to a lot of new buildings accepting cryptocurrency as a down payment from buyers.
The demand for this type of financing is strong. Currently, Milo has a waitlist of over 8,000 people who are interested in buying property not just in Florida, but in New York, California, and Texas. This could be the tip of the iceberg. In just the past 30 days, Milo has pre-approved $340 million in mortgages. That is just a tiny fraction of the wealth that is stored in crypto, which is approximately 2 trillion dollars.
There is one major drawback to crypto that has some insiders skeptical about its long-term viability. Amongst lenders, crypto is not widely perceived as a stable asset. Bitcoin in particular increased by 305 percent in 2020, then dropped by 40 percent from its all-time high.
Despite this, crypto enthusiasts are unswayed, believing that as a long-term asset, crypto offers excellent returns. Volatility aside, they may be correct, as Bitcoin has gained almost 500 percent since the end of 2019.
