Crypto Mortgages: Everything to Know

By  Beluga Research September 11, 2023

Image for Crypto Mortgages: Everything to Know


  • A crypto mortgage is a digital asset-backed loan wherein borrowers use personal cryptocurrency holdings as collateral for borrowing funds
  • Crypto mortgages can streamline the mortgage process by using cryptocurrencies as collateral, with no need for credit checks or traditional institutions
  • Platforms facilitate crypto mortgages, operating on blockchains to ensure transparent and secure transactions
  • Crypto mortgages offer advantages such as flexibility, lower barriers and borderless transactions, but borrows must also consider the risks


A crypto mortgage is a digital asset-backed loan wherein borrowers use personal cryptocurrency holdings as collateral for borrowing funds. This allows crypto holders to access liquidity without having to sell digital assets, potentially avoiding capital gains taxes and keeping exposure to the cryptocurrency market. However, these arrangements also come with risks and are subject to regulatory and lender-specific terms and conditions.

A Brief History

The idea of using cryptocurrency as collateral for loans dates back to the emergence of Bitcoin in 2009. Bitcoin's decentralized nature inspired the development of blockchain technology and the creation of other cryptocurrencies. Financial innovators recognized the potential of using cryptocurrencies as collateral, leading to the birth of crypto lending platforms.

Crypto Mortgages: Everything to Know

  • Collateralization and Loan-to-Value Ratio (LTV) . In a crypto mortgage, borrowers provide cryptocurrency as collateral, securing the loan. The "loan-to-value" ratio (LTV) determines the loan amount based on the value of the collateral. For example, an LTV ratio of fifty percent means borrowers can receive a loan worth fifty percent of the collateral's value.
  • Crypto Mortgage Platforms . Several platforms facilitate crypto mortgages, connecting borrowers and lenders. These platforms operate on blockchains, ensuring transparent, secure and immutable transactions.
  • Smart Contracts . Smart contracts play a crucial role in crypto mortgages. Coded on blockchains, these self-executing contracts enforce agreed-upon terms and conditions without intermediaries, reducing costs and enhancing efficiency.
  • Volatility and Margin Calls . Cryptocurrencies' price volatility poses risks for borrowers and lenders in crypto mortgages. Lenders mitigate these risks with "margin calls." In these instances, if the collateral's value drops below a specified threshold, borrowers may need to provide additional collateral or repay part of the loan to maintain the required LTV ratio.
  • Interest Rates . Interest rates in crypto mortgages vary based on platforms, borrower creditworthiness and market conditions. Lenders earn interest on cryptocurrency holdings, while borrowers pay interest on the loan amount. Crypto mortgage interest rates tend to be higher due to cryptocurrency risks.
  • Benefits of Crypto Mortgages . Crypto mortgages offer advantages over traditional mortgages, as they provide a seamless way to access funds without credit checks or paperwork. Blockchain technology ensures transparency, security and immutability, and borrowers retain ownership of cryptocurrency assets while utilizing associated values.
  • Risks and Considerations . Despite the benefits, borrowers must consider the risks associated with crypto mortgages. Cryptocurrency volatility can lead to fluctuations in collateral value, margin calls or asset liquidation. The regulatory landscape for cryptocurrencies and crypto mortgages is evolving, and borrowers should be aware of legal implications and tax obligations.

Getting Started

To get started with a crypto mortgage, users must first acquire a significant amount of cryptocurrency to use as collateral and find a reputable lending platform that offers crypto mortgage options. These platforms usually require users to go through a "Know Your Customer" (KYC) process to verify identities and creditworthiness.

Once approved, users can apply for the loan. The loan amount is typically a percentage of the value of the collateralized cryptocurrency. The LTV ratio varies depending on the platform and the cryptocurrency used. It should be noted that the collateral's value can be volatile, and lenders may require users to maintain a certain margin to mitigate risks.

If a loan application is approved, the user can transfer cryptocurrency holdings to a secure wallet provided by the lending platform. The collateral stays in this wallet until the loan is fully repaid. During the loan term, the user may have limited access to the associated cryptocurrency, depending on the lending agreement.

Unique Aspects

Crypto mortgages have a unique aspect due to the decentralized nature of blockchain technology. The transparency and immutability of this technology enable secure and trustworthy transactions, with collateral and loan details recorded on a public ledger.

Furthermore, crypto mortgages allow borrowers to leverage cryptocurrency without selling it. This is beneficial for those who believe in the long-term value of digital assets and do not want to miss out on potential price appreciation. By using cryptocurrency as collateral, borrowers can access liquidity while retaining ownership.

Moreover, crypto mortgages offer an alternative lending option for individuals who may not meet traditional financial institutions' strict requirements. Collateral in the form of cryptocurrency reduces the impact of credit history and income on loan eligibility, expanding access to financial services for those with limited options.


  • Flexibility . Crypto mortgages offer borrowers more flexibility compared to traditional mortgages. Borrowers can use digital assets as collateral, accessing funds without selling cryptocurrencies. This is particularly beneficial for long-term investors who want to keep crypto holdings while accessing liquidity.
  • Lower Barriers . Crypto mortgages provide easier access to funding compared to traditional mortgages. Since cryptocurrencies operate on decentralized networks, borrowers from anywhere can apply for a crypto mortgage without geographical restrictions.
  • Speed . Blockchain technology enables quick execution of crypto mortgage transactions. The decentralized nature of cryptocurrencies eliminates the need for intermediaries, reducing the time required to process and approve a mortgage. This speed benefits borrowers who need immediate access to funds for time-sensitive purposes.
  • Borderless Transactions . Cryptocurrencies transcend geographical boundaries, allowing borrowers to engage in cross-border transactions without currency conversions or extensive paperwork. This accessibility is particularly useful for individuals in countries with limited traditional banking services or currency volatility.
  • Potential for Lower Interest Rates . In some cases, crypto mortgages may offer lower interest rates compared to traditional mortgages. This advantage arises from the decentralized nature of cryptocurrencies, which eliminates certain costs associated with traditional financial systems. Additionally, crypto mortgage lenders may offer competitive rates to attract borrowers in the emerging crypto lending market.


  • Volatility . Crypto mortgages face the challenge of cryptocurrency volatility. The value of digital assets can fluctuate significantly within short periods, introducing uncertainty for borrowers and lenders. If the collateralized cryptocurrency's value decreases substantially, borrowers may face liquidation or additional collateral requirements.
  • Regulatory Uncertainty . The regulatory landscape for cryptocurrencies and crypto mortgages is evolving in many jurisdictions. The lack of clear guidelines and regulations creates uncertainty for borrowers and lenders, increasing perceived risks. Borrowers should consider the legal and regulatory implications of engaging in crypto mortgage transactions in specific jurisdictions.
  • Limited Lender Options . The crypto lending market is still relatively nascent compared to traditional lending. As a result, borrowers may have limited options for choosing a crypto mortgage lender. This limited availability may lead to less competitive loan terms and higher interest rates compared to traditional mortgages.
  • Technical Knowledge Required . Engaging in crypto mortgages requires technical knowledge and familiarity with cryptocurrencies. Borrowers must understand how to manage digital assets, navigate cryptocurrency wallets and handle security considerations. The technical complexity involved may pose a barrier for individuals unfamiliar with cryptocurrencies.
  • Lack of Consumer Protection . Unlike traditional mortgages subject to consumer protection regulations, crypto mortgages may not offer the same level of safeguards. The decentralized nature of cryptocurrencies means borrowers may have limited recourse or protection in case of fraud or disputes. Therefore, borrowers must conduct thorough due diligence and choose reputable lenders to mitigate risks.