cryptocurrency in the mortgage industry

Cyptocurrency In The Mortgage Industry

September 13, 2021

The mortgage industry is one of the few industries where cryptocurrency can have a positive impact on the way that mortgages are processed. Blockchain technology, which underlies Bitcoin and other cryptocurrencies, offers an alternative to traditional money market instruments for real estate loans. Blockchain allows for far more secure transactions, as data can’t be altered once a “block”, or data packs,  as well as the blocks within the chain able to reference one another, and modify existing errors. 

The lack of liquidity in many crypto markets makes large-scale adoption unlikely at this time, but there are ways around these problems. One solution would be to use a stablecoin pegged to fiat currency as collateral instead of bitcoin or ether. This new system would solve some of the problems associated with volatility while still providing power behind blockchain’s distributed ledger technology.

Before diving into the future of cryptocurrency in the mortgage industry, you need to be aware of some of the most common cryptocurrency buzzwords:

Cryptocurrency: a digital currency in which transactions are verified and records maintained by a decentralized system using cryptography, rather than by a centralized authority.

Blockchain: Blockchain technology is a digital form of record-keeping and the underlying technology behind cryptocurrencies. In a blockchain, individual blocks build upon one another to create an unchangeable ledger that records transactions or other data as it travels from computer A to B on millions of devices connected via the Internet.

Decentralization: The principle in which instead of having one person or group control everything, changes and new things have to go through a majority vote of all people using the blockchain before anything can happen.

Coin: A representative store of digital value that lives on a given blockchain or cryptocurrency network. Some blockchains have the same name for both the network and coin, such as Bitcoin (BTC).

Stablecoin: a coin that pegs its value to some other non-digital currency or commodity.

Bitcoin: The first, most popular, and most valuable cryptocurrency available, launched to the public in 2009. While hovering anywhere between $40,000-$60,000 per coin, Bitcoin is known to rapidly fluctuate in price.

Ethereum: Second largest cryptocurrency by daily trade volume. Ethereum is a network and software platform that makes it possible to create new applications. Developers can use Ethereum’s associated currency, ether, when creating these apps.

Dogecoin: Created in 2013 as a joke, Dogecoin is a “meme coin”, it was developed initially to poke fun at the wild speculation over cryptocurrency’s longevity. Today, however, Dogecoin is widely considered a legitimate investing opportunity. 

Cryptocurrency’s Current Prospects In The Mortgage Industry

Unfortunately for those excited by the idea of cryptocurrency making its way into the mortgage industry, you’ll likely have to wait a bit longer. Due to the lack of regulations surrounding crypto and how gains will be taxed, buyers and sellers are slow to adopt crypto in real estate transactions. While cryptocurrency has been around for over a decade, it’s still rather fresh for the general public. Even if a buyer were to find a seller interested in accepting cryptocurrency, it’s still unlikely you’ll be able to secure title insurance or an escrow company willing to oversee the crypto transaction. As of right now, Freddie Mac does not recognize cryptocurrency as an acceptable source of funds.

Crypto In The Mortgage Industry’s Future

While there’s certainly a road paved towards cryptocurrency being accepted for real estate transactions, it will take winning the general public over and convincing them that crypto is the way of the future. In the meantime though, we could see one technology make its way into the mortgage industry soon: blockchain. 

Today’s mortgage lending process is well-established, yet slow and requires several additional parties to confirm documentation. Blockchain technology has the potential to drastically streamline the entire mortgage lending process, while also lowering costs drastically and secure sensitive information and transaction records. Blockchain offers safer record-keeping than traditional methods, while also being easier to access. For example, prospective buyers could automatically be approved for their loan thanks to information already submitted.

While cryptocurrency is still a while away from being widely accepted, it’s only a matter of time. It’s the future of the mortgage industry, which is why American Bancshares is following it closely so we’re ready for you when the time comes. Have questions about other emerging technologies and trends in the mortgage industry? Contact us today either online or by giving us a call at +1 (833) 937-2276.


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