Crypto-Backed Mortgages: Practical Insights and Global Trends

In 2025, the crypto mortgage sector is experiencing rapid growth, reflected both in the numbers and in the emergence of various industry initiatives. Regulatory bodies, venture capital funds, banking institutions, FinTech companies, major real estate market players, and representatives of related sectors are all paying close attention to this field.

What makes 2025 a turning point for the adoption of crypto-backed mortgages? On one hand, the digital asset infrastructure is reaching a level of institutional-grade reliability. On the other, traditional economic sectors are being reshaped, prompting market participants to explore innovative growth strategies. At the same time, end-user demand for crypto-native financial products continues to rise. Against this backdrop, crypto mortgage solutions are moving from theory to practical implementation.

Crypto-Backed Mortgage Loans in 2025: A Market Snapshot 

The global crypto mortgage market is still in its early stages, largely limited to initiatives by individual countries and companies. This situation mirrors the broader Bitcoin lending market, which, despite being at a formative stage, is already valued at $8.58B globally, with projections suggesting growth to $45.27B by 2030.

The United States is currently the leader in the crypto mortgage sector, with a number of companies offering mortgage products incorporating crypto financing for both American and international clients. The largest players include platforms like Milo and Figure. For example, in 2024 alone, Milo issued crypto mortgage loans worth $65 million, accounting for roughly a quarter of the company’s total lending portfolio.

Other jurisdictions where the crypto mortgage market is actively forming and expected to develop in the near future include:

1. India. Major crypto exchanges, such as CoinDCX, already offer crypto mortgage products that operate independently of traditional financial institutions.
2. Europe. In countries like Germany, Switzerland, France, and the Netherlands, crypto mortgage offerings are emerging through established banks and financial institutions. This trend is being accelerated by the adoption of the Markets in Crypto-Assets (MiCA) regulatory framework, which provides legal clarity for digital asset integration in financial services.
3. Hong Kong. As a Special Administrative Region of China, Hong Kong aims to become a regional hub for digital assets, allowing FinTech companies to develop innovative products within its regulatory sandbox. And pilot innovative crypto-backed mortgage products within a controlled and supportive legal environment.
4. UAE. Although currently at the level of individual initiatives, the UAE is seeing the emergence of crypto mortgage products alongside the rapidly growing real estate tokenization sector and the digital asset market in general.

At present, the development of the crypto mortgage industry is constrained by several factors:

• Lack of clear regulatory frameworks or legal restrictions on the use of cryptocurrencies
• Underdeveloped infrastructure for digital asset operations
• Fragmentation of the crypto market and weak integration with the traditional financial system.

Therefore, regulatory clarity, broader acceptance of cryptocurrencies, and the implementation of Web3 infrastructure solutions across various economic sectors are expected to drive the growing popularity of crypto mortgages.

How Crypto-Backed Mortgages Work in Practice

There are several key considerations that all parties involved in crypto mortgage transactions must take into account to ensure successful and secure execution. 

Who Might Be Interested in Crypto Mortgages, and Why?

Crypto-backed mortgages primarily appeal to a new generation of investors who often lack a traditional credit history. The main value for them lies in the ability to secure a loan to purchase real estate without having to sell their BTC, ETH, or other digital assets.

These crypto investors often hold substantial digital wealth that is difficult to leverage within the traditional banking system. Demand from this segment continues to grow as the crypto market expands, interest in decentralized financial instruments rises, and the broader Web3 industry develops.

Assessing the Creditworthiness of Crypto Borrowers

For real estate agents and mortgage brokers encountering a new class of clients, it’s increasingly important to rethink how creditworthiness is assessed. While conventional borrowers typically verify income through pay stubs and bank statements, crypto investors require a different approach — one that focuses on the liquidity and verifiability of their digital assets.

What should be requested:

1. A letter from a custodian or financial institution confirming where the digital assets are held.
2. Proof of custody on a regulated exchange, such as Coinbase or Gemini.
3. On-chain evidence of asset ownership, such as a cryptographic signature verifying control over a wallet address.

Additionally, on-chain analysis tools like wallet screening via Chainalysis, TRM Labs, or similar services can be used. The purpose of this analysis is to ensure that the funds are not linked to money laundering activities or sanctioned addresses.

Blockchain activity analysis and checks for on-chain reputation markers can also be useful. Participation in DeFi protocols or ownership of Soulbound tokens, for instance, can provide additional signals about a borrower’s reliability.

Moreover, zero-knowledge KYC (zk-KYC) technologies are gaining traction as a way to cryptographically verify specific identity attributes without exposing personal data, offering a privacy-preserving solution to decentralized client identification. 

Technical and Legal Structuring of Crypto Mortgages 

When structuring a loan secured by both real estate and cryptocurrency, participants need to combine solutions from both domains. From a legal perspective, this usually involves two groups of agreements:

1. Standard mortgage documentation, which typically includes a real estate purchase agreement, a registered mortgage or lien filing with the land registry, or, alternatively, the transfer of property rights into a trust or escrow structure.
2. Digital asset collateral agreements that detail the terms of pledge, custody, and management of the crypto assets used as collateral.

In any case, all parties involved — lenders, borrowers, and servicing agents — should engage legal advisors familiar with local laws governing digital assets and real estate transactions to ensure all documentation is prepared correctly.

The Legal Landscape of Crypto-Backed Mortgages

In the legal landscape, crypto mortgages remain at the intersection of several domains, including lending, securities issuance, and real estate. Additionally, tax compliance and adherence to AML/CTF standards must be considered. Therefore, participants need to address a wide range of compliance issues.

For example, in many jurisdictions, cryptocurrency is legally recognized as property and may be used as collateral. However, under conventional mortgage frameworks, there may be restrictions on using crypto assets as security, especially if it is structured as off-balance-sheet security.

In cases where income verification is waived due to overcollateralization, questions arise regarding the loan’s alignment with regulatory standards. Crypto-backed mortgages are frequently classified as non-qualified mortgages (non-QM), which is permissible, but typically requires additional disclosures for investors and secondary market participants.

Moreover, every crypto transaction within a deal must be transparent and traceable. Currently, it is common practice to convert all crypto payments related to real estate purchases into fiat currency through regulated services, ensuring compliance with the Travel Rule and all necessary reporting requirements.

Tax Considerations for Crypto-Backed Mortgage Deals

It is essential to consider tax implications at every stage of a crypto mortgage transaction:

1. Brokers and agents should be aware that crypto-backed mortgage structures can trigger tax consequences for both borrowers and investors. It is critical to involve tax advisors during the early stages of deal structuring.
2. In most cases, crypto mortgage agreements are designed to avoid triggering an immediate taxable event, such as the direct sale of cryptocurrency. This is typically achieved by using crypto assets as collateral rather than as a means of payment.
3. If the collateral is partially liquidated during the life of the loan — for instance, due to a market downturn triggering a margin call — this may create a tax liability. Borrowers should be made fully aware of such potential consequences in advance.
4. Loan interest paid in stablecoins is treated as monetary interest income for tax purposes. These payments must be properly reflected in the company’s accounting and tax reporting.
5. Investors funding crypto mortgages through DeFi protocols or other decentralized lending mechanisms should note that their earnings are generally classified as interest income and subject to taxation.

Structuring a crypto mortgage requires a more sophisticated and granular approach than traditional lending. When planning such transactions, it is important to allocate additional time and budget for legal audits, tax reviews, and compliance with regulatory requirements.

Key Risks of Crypto-Backed Mortgage Lending

While crypto mortgages open up new financial opportunities, they also come with specific risks that are not typical of traditional mortgage lending.

Volatility of Crypto Collateral

The main vulnerability of crypto mortgages lies in the inherent price volatility of the collateral. Even with overcollateralization, a sudden market downturn can rapidly erode the safety buffer. In the event of a sharp price drop, the borrower may be required to either top up the collateral (a margin call) or partially repay the debt. Otherwise, the lender has the right to liquidate part of the crypto assets.

Managing this risk requires lenders to have robust systems for real-time monitoring and communication, while borrowers need flexibility in liquidity management to be able to quickly increase their collateral if needed.

Exchange Rate and Currency Risks

Additional complications may arise when the loan and the borrower’s income are denominated in different currencies. Such discrepancies can lead to unexpected losses due to exchange rate fluctuations and currency revaluation. Using stablecoins for settlements partially mitigates these risks and simplifies calculations, especially in international transactions.

However, even stablecoins are not entirely free from vulnerabilities. There remains a small possibility of losing their peg to the underlying asset or facing regulatory restrictions on their use. 

Technological and Operational Risks

Working with crypto assets requires technical literacy. Tools such as smart contracts, multisignature wallets, and NFT escrows are convenient but inherently carry potential vulnerabilities. Errors in entering wallet addresses, bugs in smart contract code, and human error can all lead to irreversible losses.

To minimize these risks, it is crucial to work with reliable infrastructure partners, use proven solutions, and engage technical experts to audit smart contracts.

Transaction Transparency and Recognition by Controllers  

As crypto mortgages are not yet fully integrated into traditional financial and legal systems, some operations remain outside the scope of external regulation. For example, when a property is held on the balance sheet of a limited liability company (LLC) and ownership rights are represented via a non-fungible token (NFT), no changes are recorded in the state registry until the transaction is completed.

Similarly, a borrower’s debt obligations may not be reported to conventional credit bureaus, complicating the assessment of their overall financial position. Such a lack of transparency can be perceived by regulators as a way to circumvent existing rules, potentially attracting increased scrutiny.

To mitigate these risks, many crypto mortgage providers now employ dual-reporting practices: registering liens both through traditional legal channels and via on-chain mechanisms, submitting relevant information to tax authorities, and processing deals through regulated platforms. 

Key Trends in Crypto-Backed Mortgage Lending 

Currently, several main trends are shaping the medium-term future of the crypto mortgage sector: 

1. Growth of institutional involvement. Banks, FinTech firms, and insurance providers are expected to enter the market by launching their own crypto mortgage products or forming strategic partnerships. This evolution is likely to drive interest rate compression and lead to more standardized lending terms. 
2. Widespread adoption of stablecoins. While stablecoins are already accepted as collateral, the next wave of innovation will include mortgage products fully denominated in stablecoins, with both collateral and repayments pegged to fiat-backed digital assets. This would reduce currency risk and simplify settlement processes.
3. Integration with central bank digital currencies (CBDCs) and government programs. Crypto mortgage products may eventually connect with state-backed solutions, enabling automated payment execution via smart contracts, along with interest rate subsidies and other forms of government support.
4. Securitization through DeFi protocols. DeFi-based liquidity pools could emerge as an alternative to traditional capital markets, functioning as blockchain-native analogs to mortgage REITs. Tokenized mortgage assets could be bundled, fractionalized, and financed through smart contract–enabled structures.
5. Transformation of the broker’s role. Instead of merely collecting documents, brokers will help clients navigate between TradFi and DeFi solutions, assess on-chain reputations, and liaise with crypto funds and platforms. Their toolkit will increasingly include blockchain-based dashboards to submit applications, track loan execution, and manage client portfolios in real time.

Overall, the transformation will impact every aspect of mortgage lending. New products will emerge, such as insurance policies covering technical risks related to smart contract reliability and digital collateral storage. Risk assessment models that factor in crypto asset volatility are already being developed. Brokers will gain access to blockchain dashboards, enabling them to submit applications, monitor deal execution, and manage clients’ loan portfolios.

As traditional real estate begins to merge with blockchain infrastructure and on-chain ownership models, the advantage will belong to those professionals and companies who can adapt faster than their competitors. Success will depend on mastering Web3 solutions and creating practical models of interaction between traditional and decentralized structures.