Brokers Explore Potential of Crypto-Backed Mortgages in Australia – Money Advice Experts in Services

Brokers in Australia are considering the potential of crypto-backed mortgages following the announcement of plans for the country’s first Bitcoin-backed home loan. Despite the increasing popularity of cryptocurrency in Australia, lenders have been hesitant to accept it as security. However, with the rising popularity of cryptocurrency, a new lending product is on the horizon that would enable crypto holders to utilize bitcoin as security for property purchases while retaining exposure to the Bitcoin market.

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Block Earner, a digital asset fintech company, is gearing up to introduce a crypto-backed offering that would provide cash loans against bitcoin, covering up to 50% of the property value. This innovative approach would allow borrowers to fund the deposit component using Block Earner loans, with traditional mortgage lenders financing the rest of the property price through standard home loans.

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While formal lending partnerships are in the final stages of discussion, Mortgage Direct, a boutique lender aligned with Block Earner, has already expressed support for this novel concept. Customers looking to avail themselves of this offering would need to borrow a minimum of $25,000, requiring approximately 0.25 BTC as security based on current rates. The bitcoin-backed deposit loan could be borrowed interest-only for up to four years, with repayment options available in crypto, cash, or through refinancing at the end of the loan term.

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Block Earner assures borrowers that they can exit the bitcoin loan without penalties and that their bitcoin holdings would be safeguarded in institutional-grade custody through Fireblocks. The company is expected to reveal full rollout plans for the product later in 2025.

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However, with innovation comes risks, and Block Earner has outlined the potential risks associated with their product. Borrowers maintain full exposure to Bitcoin’s price fluctuations, allowing them to benefit from appreciation but also subjecting them to potential losses if the Bitcoin value declines. To mitigate risks, Block Earner has implemented a variety of safeguards, including over-collateralization, real-time alerts, and a 30-day cure period to address sharp market volatility.

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Brokers have shared their perspectives on this emerging trend. Chris Dodson of Mortgages Plus believes that while cryptocurrencies are evolving as an asset class, more regulatory clarity is essential before their integration into the mortgage sector. Similarly, Vita Finance director David Vizza highlighted the risks associated with crypto, including volatility, regulatory uncertainties, and security concerns.

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Arnab Baral, CEO of Cinch Loans, emphasized the importance of implementing robust risk controls and clear contractual terms when incorporating crypto into home loans. He suggested a hybrid structure involving stablecoins to mitigate volatility and enhance asset backing.

Although the concept of crypto-backed mortgages presents benefits such as increased deposit size and potential LMI savings, mainstream adoption may be hindered by regulatory uncertainties and risk considerations. While the innovation is promising, it may cater more to a niche market of tech-savvy investors with a high-risk tolerance in the short term.

Looking ahead, brokers are cautiously optimistic about the future of crypto-backed lending products linked to mortgages. While the potential benefits are clear, regulatory oversight and risk management remain crucial factors in determining the broader acceptance of crypto in the home loan market.

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