Executive summary
Bitcoin-backed home financing currently appears in three distinct product families that often get conflated in marketing: (a) crypto-collateralized mortgage lending (true property lien plus Bitcoin/Ether collateral, with liquidation/foreclosure mechanics), (b) mortgage underwriting that recognizes crypto holdings without pledging them (non-QM/non-agency programs that treat verified exchange-held crypto as reserves and sometimes “income” proxies), and (c) BTC-collateralized cash loans that borrowers may use for down payments or purchases but are not mortgages (no property lien) and are governed by margin calls / liquidation thresholds. citeturn14search31turn19search37turn14search30turn14search2
From a market-structure perspective, Bitcoin-backed mortgages are a niche overlay on top of a much larger crypto-collateralized credit ecosystem. Galaxy Research estimated total crypto‑collateralized lending (CeFi + DeFi lending apps + crypto-collateralized CDP stablecoins) reached $73.59B at the end of Q3 2025, with DeFi lending apps at $40.99B and CeFi open borrows at $24.37B. citeturn23view0 By contrast, entity[“company”,”Milo”,”crypto mortgage lender”] announced it surpassed $100M in “crypto mortgages” originated, indicating mortgage-specific volumes are orders of magnitude smaller than broader crypto-collateralized lending. citeturn22search7turn14search31
Regulation is the main gating factor for scale. In the entity[“country”,”United States”,”federal republic”], mortgage origination/servicing is heavily covered by federal consumer-finance disclosure and conduct regimes (e.g., integrated disclosures under TILA/RESPA) and by licensing/registration rules for mortgage originators. citeturn3search5turn3search17turn3search2 Separately, crypto custody / transfer activity triggers AML obligations and, depending on structure and jurisdiction, potentially financial services licensing (state virtual currency regimes; finance-lender licensing; or equivalent). citeturn3search7turn4search0turn4search1 Comparable “two-layer” compliance (mortgage rules + crypto rules) is visible across the entity[“country”,”United Kingdom”,”sovereign state”], entity[“organization”,”European Union”,”supranational union”], entity[“country”,”Canada”,”federal state”], entity[“country”,”Australia”,”sovereign state”], and entity[“country”,”Singapore”,”city-state”], though the perimeter for “crypto lending” differs materially. citeturn5search8turn5search1turn5search2turn6search0turn6search2turn7search6
A rigorous borrower risk view centers on volatility-driven forced selling (margin calls/liquidations), custody/counterparty risk, and legal/regulatory risk (licensing, consumer protection, and changing supervisory expectations). Product design choices—starting LTV, liquidation thresholds, and rehypothecation policy—directly determine how likely a borrower is to be liquidated during drawdowns. citeturn14search30turn14search2turn14search1turn21search8
Market map of providers and products
Provider taxonomy
“Bitcoin-backed mortgage” is used in the market to describe at least two different realities:
1) Collateralized mortgage: the lender places a lien on the property and also holds crypto collateral; default can be satisfied via collateral liquidation and/or foreclosure. citeturn14search31
2) Underwriting recognition: crypto is verified and haircut-adjusted to count as reserves and possibly “income” in non-QM programs; no custody transfer to the lender, but custody location constraints (regulated exchanges / approved custodial wallets) are common. citeturn19search37turn19search2turn19search1
3) BTC-backed loan (non-mortgage): a cash loan secured by BTC; borrower retains BTC price exposure but faces margin calls/liquidation. citeturn14search30turn21search22turn20search17
Comparative table of mortgage-oriented offerings and underwriting programs
| Provider / program | What it is (mortgage vs underwriting) | How BTC is used | Custody model | Key terms disclosed publicly | Noted constraints / gaps |
|---|---|---|---|---|---|
| entity[“company”,”Rate”,”mortgage lender | ratefi”] (RateFi) | Underwriting program (non-QM) | Crypto may count as qualifying assets/reserves and “in some cases” income; down payment/closing still paid in USD | No lender custody; assets must be in approved custodial wallets; non-custodial wallets and DEX excluded citeturn19search37turn18view0 | Product page describes eligible assets (BTC, ETH, XRP, USD-backed stablecoins) and non-custody approach citeturn19search37turn19search35 |
| entity[“company”,”Newrez”,”mortgage lender and servicer”] | Underwriting program (non-agency “Smart Series”) | “Recognize” certain crypto for asset verification and income estimation without liquidation | No explicit custody transfer described; verification and eligibility rules referenced but not fully enumerated in the press materials citeturn19search1turn19search4turn19search9 | Launch intent: crypto used without liquidation; positioned as non-QM/non-agency rollout citeturn19search1turn19search15 | Which assets and the exact haircut methodology are not fully detailed in press release (unspecified) citeturn19search1turn19search4 |
| entity[“company”,”Newfi Lending”,”non-qm mortgage lender”] (DSCR guideline expansion) | DSCR underwriting guideline change (investor-oriented) | Up to 25% of current BTC/ETH value in a Coinbase account may count toward DSCR reserves; also allows crypto funds/ETFs under conditions | Assets must be held at specified custodial venues (e.g., Coinbase account for BTC/ETH); traditional providers for crypto funds/ETFs citeturn19search2turn19search5 | Quantitative caps & documentation recency: 25% for BTC/ETH at Coinbase; 50% for crypto mutual funds/ETFs held at traditional providers; statements within 60 days; crypto capped at 50% of total reserves citeturn19search2turn19search5 | Not a pledge-based collateral product; reserve-only framework; mortgage rates/fees follow DSCR product terms (unspecified) citeturn19search5 |
| entity[“company”,”Milo”,”crypto mortgage lender”] | Crypto-collateralized mortgage (property lien + crypto collateral) | Pledge BTC/ETH as collateral; lender pays seller and places a lien; default may allow lender to access crypto or foreclose | Custody described as either traditional custody with partners or “self-custody option” (details not fully machine-readable due to site restrictions) citeturn14search27turn14search31 | Example terms reported: 1:1 crypto-to-home-price collateral requirement; interest-only payments for first 10 years then amortization; 100% financing framing citeturn14search31turn14search11 | Precise rate/fee schedule and margin-call triggers are not fully disclosed in accessible primary pages (unspecified); company claims “zero margin calls” in announcements/coverage citeturn22search7turn22search34 |
Comparative table of BTC-collateralized loan providers (often used for real estate liquidity)
| Provider | Loan type | Starting LTV (public) | Margin call / liquidation triggers (public) | Pricing & fees (public snapshot) | Custody model | Rehypothecation stance (public) |
|---|---|---|---|---|---|---|
| entity[“company”,”Ledn”,”crypto lender”] | BTC-backed loan (USD funded; multiple loan custody models) | Commonly shown at 50% in calculators (varies) citeturn14search36turn14search25 | Thresholds vary by product/jurisdiction (often not shown on marketing pages; unspecified) citeturn14search36turn14search25 | Examples shown: 2% admin fee; APR examples shown on borrowing pages and calculators (variable by time) citeturn0search26turn14search36 | “Custodied” loans: collateral held in custody (with Ledn or funding partner), ring-fenced; permitted re‑posting to a USD funding partner but “cannot be further lent out” citeturn14search1turn14search17turn14search13 | Standard loans explicitly described as rehypothecating collateral; custodied loans structured to avoid further rehypothecation citeturn0search35turn14search1turn14search5 |
| entity[“company”,”Unchained Capital”,”bitcoin financial services company”] | BTC-backed loan with collaborative custody | Exact starting LTV varies by contract (often not stated on the cited pages; unspecified) citeturn0search25turn14search2 | CTP violation triggers below 150% collateral-to-principal ratio (≈ 66.7% principal-to-collateral), 24-hour cure window; if not cured: foreclosure notice then liquidation sufficient to repay balance/fees; remaining collateral returned citeturn14search2turn14search10 | Pricing varies by loan agreement (unspecified in the cited help pages) citeturn14search2 | Multisignature address / collaborative custody described citeturn0search25turn0search34 | Public emphasis on borrower-verifiable custody; rehypothecation not described in the cited pages (unspecified) citeturn0search25turn14search2 |
| entity[“company”,”APX Lending”,”crypto lender | canada”] | BTC/ETH-backed loan (Canada-focused) | 20–60% origination range citeturn14search20turn14search0 | Soft margin call at 80% LTV; liquidation at 90% LTV (platform description) citeturn14search30turn14search20 | Rates “from 9.99%”; terms 3–60 months; early repay/redraw features described citeturn14search0turn14search20 | Collateral held in segregated cold wallets with BitGo Trust; Fireblocks used for in-transit protection (per APX materials) citeturn14search8turn14search0 |
| entity[“company”,”Arch Lending”,”crypto lender | chainfi inc”] | BTC/ETH/SOL-backed loan (line-of-credit style) | Up to 60% LTV citeturn20search4turn21search7 | Margin call/liquidation thresholds not clearly disclosed in the cited marketing excerpts (unspecified) citeturn20search4turn20search24 | “From 8.49% APR”; terms up to 12 months, extendable citeturn20search4turn20search24 | Qualified custody with Anchorage; marketed as insured and bankruptcy-remote citeturn21search7turn21search8turn21search15 |
| entity[“company”,”Strike”,”bitcoin payments app and lender”] | BTC-backed loans (12-month term) | Max initial 50% LTV citeturn21search0turn21search22 | LTV rises over time under “payment at maturity” because interest accrues; margin-call mechanics discussed in product materials but not fully enumerated in the cited excerpts (unspecified) citeturn21search22turn21search6 | 12-month term; interest “starting at 9.5% APR”; 0% origination fee; no early repayment fees citeturn21search0turn21search2turn21search20 | Collateral custody not specified in the cited pages (unspecified) citeturn21search0turn21search6 | Rehypothecation policy not specified in the cited pages (unspecified) citeturn21search0turn21search6 |
| entity[“company”,”SALT Lending”,”crypto-backed lender”] | Crypto-backed loans (long-term options) | Up to 70% LTV; SEC filing notes LTV below 70% in originations citeturn20search14turn20search38 | Liquidation mechanics depend on elected features/terms (not fully detailed in marketing excerpts; unspecified) citeturn20search2turn20search14 | Marketing: rates starting 9.95%, terms 1/3/5 years; fees page lists 1% origination and other fees citeturn20search14turn20search2 | Custody approach varies (not fully specified in cited excerpts; unspecified) citeturn20search2turn20search14 | Rehypothecation policy not stated in cited sources (unspecified) citeturn20search14 |
| entity[“company”,”Xapo Bank”,”gibraltar licensed bank”] | Bank BTC-backed loans | Up to 40% LTV citeturn20search17turn20search5 | Liquidation can be triggered if LTV rises too high (general product description); thresholds not specified in cited excerpts (unspecified) citeturn20search1turn20search17 | Variable interest linked to Federal Reserve rates; fixed repayment period; max loan amount shown as $5M on calculator page citeturn20search5turn20search9 | BTC deposited into bank vault in-app citeturn20search5turn20search17 | Rehypothecation policy not stated in cited sources (unspecified) citeturn20search17 |
| entity[“company”,”Sygnum”,”digital asset bank”] | Lombard-style credit lines (qualified / institutional) | Not shown in cited lending pages (unspecified) citeturn0search23turn0search27 | Not shown in cited lending pages (unspecified) citeturn0search23 | “Competitive rates” language; numeric pricing not disclosed in cited excerpts (unspecified) citeturn0search23turn0search27 | Banking/custody model implied (client relationship) citeturn0search23 | Rehypothecation not specified in cited lending pages (unspecified) citeturn0search23 |
Regulatory frameworks and licensing by jurisdiction
United States
At the federal level, a mortgage that is a closed-end consumer credit transaction secured by real property is subject to Truth-in-Lending and integrated disclosure requirements (Loan Estimate / Closing Disclosure) under the CFPB’s TILA/RESPA integrated mortgage disclosure rule. citeturn3search5turn3search17turn3search1 Mortgage originators also fall under SAFE Act requirements for licensing/registration via the NMLS framework (federal registration for bank employees; state licensing for nonbank MLOs). citeturn3search2turn3search6turn3search18
Crypto-related compliance depends on the exact business model. For AML, FinCEN’s interpretive guidance explains how BSA/MSB obligations apply to business models involving convertible virtual currencies, particularly where activity constitutes “money transmission.” citeturn3search7turn3search3turn3search27 Structuring a BTC-collateralized loan where the lender takes possession/control of BTC collateral can also intersect with state virtual currency regimes and general lending licensing laws (see “Key states” below). citeturn4search8turn4search6turn4search22
A critical mortgage-specific development is the FHFA’s direction to the GSEs to develop proposals to consider cryptocurrency holdings in single-family mortgage loan risk assessments, potentially without requiring conversion to USD, subject to being evidenced and stored on U.S.-regulated centralized exchanges. citeturn17search0turn17news38turn17news40 However, existing GSE seller/servicer guidance historically required conversion to dollars for use as a source of funds (and includes restrictions such as not using virtual currency for earnest money deposits), underscoring that agency-conforming channels and non-agency channels may differ for an extended period. citeturn17search4turn17search1
Key state overlays
New York: Operating crypto custody/exchange-type activity in New York typically requires NYDFS authorization via BitLicense or an NY Banking Law charter; NYDFS also emphasizes custody structures, customer protection, and disclosure expectations for regulated entities. citeturn4search0turn4search8turn4search3turn4search11
California: California’s DFPI has taken enforcement actions relating to unlicensed crypto lending and highlights both lending-license and consumer-protection obligations; DFPI also describes the Digital Financial Assets Law (DFAL) licensure timeline (with licensure requirements for certain crypto companies serving Californians beginning July 1, 2026 / application pending alternatives). citeturn4search2turn4search22turn4search1turn4search5 Separately, DFPI notes the California Financing Law requires licensing and regulation of finance lenders and brokers making/brokering consumer and commercial loans. citeturn4search6turn4search14
United Kingdom
Mortgage conduct is governed by the FCA’s MCOB sourcebook, which applies to firms carrying on home finance activities (including entering into regulated mortgage contracts and mortgage mediation). citeturn5search8turn5search4turn5search32
Crypto businesses in the UK fall into an AML/CTF registration regime where cryptoasset exchange providers and custodian wallet providers in scope must register with the FCA under the Money Laundering Regulations; the FCA’s own guidance states the registration requirement and references the relevant regulations. citeturn5search1turn5search25 This means a “Bitcoin-backed mortgage” provider that (i) does mortgage business and (ii) provides custody/wallet services (or uses a group entity that does) may face dual supervision burdens: mortgage conduct rules plus crypto AML registration and related operational controls. citeturn5search8turn5search1
European Union
EU residential mortgage origination is governed by national implementations of the Mortgage Credit Directive (MCD), including requirements around pre-contractual information, creditworthiness assessment, and APRC calculation frameworks. citeturn5search3turn5search19
Crypto regulation is increasingly harmonized under MiCA, which establishes a regime for crypto-asset service providers (CASPs) for covered services and includes investor-protection elements; ESMA highlights MiCA as instituting uniform EU market rules for crypto-assets not otherwise regulated. citeturn5search2turn5search26 ESMA has also warned against CASPs misrepresenting the scope of which products are regulated under MiCA, which is particularly relevant if a mortgage-related lender offers a mix of regulated custody/exchange services and unregulated lending products. citeturn5news40
A major caveat for “Bitcoin-backed mortgage” analysis is that crypto lending/borrowing may sit partially outside MiCA’s core perimeter depending on the exact structure (credit agreement vs investment product vs custody service). Practically, this pushes firms toward conservative compliance postures: clear disclosures, segregation of client assets, and avoiding “regulated status” confusion—especially when cross-selling. citeturn5news40turn5search2
Canada
Mortgage brokering and lending are largely regulated at the provincial level. For example, Ontario’s Mortgage Brokerages, Lenders and Administrators Act sets out licensing and standards of practice expectations, with FSRA describing licensing obligations and insurance requirements for mortgage brokerages/administrators. citeturn6search1turn6search13turn6search5
For crypto activity, FINTRAC describes “dealing in virtual currency” as including virtual currency exchange and transfer services, which can bring MSB obligations (including travel rule and reporting rules) depending on whether a firm’s activities meet these definitions. citeturn6search0turn6search8turn6search12 For bank exposures, OSFI has issued guidelines setting out capital and liquidity treatment of crypto-asset exposures for federally regulated institutions, with implementation indicated for fiscal Q1 2026. citeturn7search3turn7search7
Australia
Mortgage and consumer credit conduct is shaped by the National Consumer Credit Protection Act / National Credit Act framework, with ASIC’s Regulatory Guide 209 explaining ASIC’s expectations for responsible lending conduct. citeturn6search22turn6search2turn6search6
Crypto compliance commonly intersects with AML/CTF obligations overseen by AUSTRAC; AUSTRAC describes AML/CTF program requirements and maintains requirements around registration actions for digital currency exchange providers. citeturn7search0turn7search4turn7search24 Australia has also been pursuing a broader digital assets regulatory framework via consultation / proposed legislation processes, indicating a moving perimeter for custody/platform operators over the medium term. citeturn7search5turn7search25turn7search1
Singapore
Crypto service licensing centers on the Payment Services Act licensing regime and MAS regulatory notices/guidelines; MAS Notice PSN02 sets binding AML/CFT expectations for digital payment token service providers, with later versions issued under the Financial Services and Markets Act framework. citeturn7search30turn6search11turn6search3 MAS also publishes guidelines on licensing for digital token service providers, reflecting a structured licensing framework for crypto services. citeturn7search2
Mortgage lending is primarily a banking and secured-lending domain, but if a “Bitcoin-backed mortgage” product involves a DPT service (custody, transfer, brokerage), crypto licensing and AML compliance become centrally relevant. citeturn6search3turn7search6
Typical loan structures and lifecycle mechanics
Core structures seen in the market
A crypto-collateralized mortgage (as described in reporting on Milo) combines (i) a traditional lender paying the seller in fiat and placing a lien on the home and (ii) a pledge of BTC/ETH collateral in an amount stated as equal to the home price in examples. citeturn14search31turn14search11 This is structurally different from a BTC-backed cash loan (e.g., APX, Strike) where only the BTC collateral secures the lender and no property lien exists, creating a “margin loan” style liquidation profile. citeturn14search20turn21search0turn14search30
Underwriting-recognition programs (RateFi / Newrez / Newfi DSCR guidelines) are different again: they generally do not require pledging BTC, but rather require verified holdings at specific custodians/exchanges and apply caps/haircuts for qualification. citeturn19search37turn19search1turn19search2
Loan lifecycle and liquidation flow
flowchart TD
A[Borrower onboarding] --> B[KYC/AML + identity checks]
B --> C[Select product type]
C --> C1[Mortgage underwriting program<br/>crypto as reserves/income proxy]
C --> C2[BTC-collateralized cash loan]
C --> C3[Crypto-collateralized mortgage<br/>property lien + crypto collateral]
C1 --> D1[Verify holdings at approved custodians/exchanges]
D1 --> E1[Apply haircuts/caps to qualifying assets]
E1 --> F1[Close mortgage in USD]
C2 --> D2[Post BTC collateral]
D2 --> E2[Fund loan in fiat/stablecoins]
E2 --> F2[Continuous LTV monitoring]
F2 --> G2{LTV breach?}
G2 -->|No| H2[Regular payments / optional early repay]
G2 -->|Yes| I2[Margin call / cure window]
I2 --> J2{Cured in time?}
J2 -->|Yes| F2
J2 -->|No| K2[Foreclose/seize collateral<br/>per contract]
K2 --> L2[Liquidate sufficient collateral<br/>to repay principal+fees]
L2 --> M2[Return remaining collateral]
C3 --> D3[Post crypto collateral]
D3 --> E3[Close: lender pays seller; lien recorded]
E3 --> F3[Payments per schedule]
F3 --> G3{Default or collateral covenant breach?}
G3 -->|No| H3[Loan runs to maturity / refinance / payoff]
G3 -->|Yes| I3[Remedies: collateral access and/or foreclosure]
I3 --> J3[Collateral liquidation and/or property sale]A concrete example of liquidation mechanics is described in Unchained’s “CTP violation” process: an automated violation occurs if collateral-to-principal falls below 150%, with a 24-hour cure period; failure leads to a foreclosure notice and later liquidation of sufficient collateral to repay unpaid balance and fees, with remaining collateral returned. citeturn14search2turn14search10 By contrast, APX describes a two-stage threshold system: soft margin call alerts at 80% LTV and liquidation at 90% LTV. citeturn14search30turn14search20
Customer eligibility and underwriting practices
BTC-collateralized lenders often emphasize collateral-first underwriting (sometimes no credit checks) and rely on overcollateralization and automated/contractual liquidation to manage credit risk. APX explicitly markets “no credit checks” and describes borrowing power as a function of posted collateral and LTV. citeturn14search0turn14search20 Strike similarly emphasizes LTV-based sizing and offers different payment structures (monthly interest vs maturity payment) that affect how LTV evolves over time. citeturn21search22turn21search14
Mortgage-underwriting programs impose different constraints. RateFi states it will not take custody, but requires crypto to be held in “approved custodial wallets” and excludes non-custodial wallets and decentralized exchanges, effectively substituting custody-location eligibility for the traditional “seasoned funds in depository accounts” paradigm. citeturn19search37turn19search35 Newfi’s DSCR reserve guideline expansion is similarly custodian-specific and cap-specific (25% BTC/ETH value at Coinbase; 50% crypto funds/ETFs at traditional providers; recency within 60 days), indicating that “crypto in underwriting” is being operationalized with conservative caps and documentation recency requirements. citeturn19search2turn19search5
Agency-conforming baselines remain more restrictive in primary guidance: Fannie Mae’s selling guide historically accepted virtual currency for down payment/closing/reserves only after it has been exchanged into U.S. dollars and held at a U.S. or state regulated financial institution, and it disallowed use of virtual currency for earnest money deposits. citeturn17search4 Freddie Mac guidance similarly required cryptocurrency to be exchanged for U.S. dollars if it will be used as a source of funds. citeturn17search1
Risk analysis and consumer protection considerations
LTV volatility, margin calls, and forced selling
The dominant borrower risk in BTC-collateralized structures is liquidation during drawdowns. Lenders explicitly describe liquidation as a function of rising LTV when BTC price drops. citeturn20search1turn21search9turn14search30 The chart above illustrates the basic math: a higher starting LTV materially reduces the price-drop “buffer” before liquidation at a fixed liquidation threshold, which is why providers often cap origination LTV (e.g., 50–60%) and set liquidation beyond that. citeturn21search22turn14search20turn14search30
Loan design can either amplify or dampen liquidation risk. Strike notes that under a “payment at maturity” structure, interest accrues and can increase LTV over time, increasing liquidation risk if collateral value falls. citeturn21search22turn21search4 Longer-term products (e.g., multi-year BTC-backed loans) may reduce refinancing pressure but do not eliminate collateral volatility risk; liquidation remains a function of LTV thresholds and collateral pricing. citeturn20search14turn20search1
Custody, counterparty, and rehypothecation risk
Custody is a primary risk axis because a borrower frequently must transfer BTC control to the lender or a custodian. NYDFS has issued guidance emphasizing custody structures and the need for sound custody and disclosure practices for licensed entities, reflecting supervisory concerns after crypto failures. citeturn4search11turn4search3 Providers market mitigations such as segregated wallets, qualified custody, and “bankruptcy-remote” structures (e.g., APX’s segregated custody statements; Arch’s “bankruptcy-remote” positioning). citeturn14search8turn21search7turn21search15
Rehypothecation is a distinct and material risk because it creates correlation between borrower collateral and the lender’s own funding/liquidity profile. Ledn provides a clear public contrast between “standard” loans that rehypothecate collateral to lower rates and “custodied” loans where collateral may be re-posted only to a funding partner and cannot be further lent out to generate interest. citeturn0search35turn14search1turn14search5 Firms advertising “no rehypothecation” often position it as a key post‑2022 trust signal (e.g., APX and Arch). citeturn14search0turn21search8
Legal and regulatory risk (licensing, enforcement, perimeter shifts)
The compliance perimeter for crypto lending has proven unstable. California DFPI enforcement actions and press materials illustrate regulator willingness to treat certain crypto-backed lending as requiring lending licenses and consumer protection compliance. citeturn4search2turn4search22turn4search6 In New York, BitLicense/charter regimes and updated custody guidance underscore that custody and consumer disclosures are not “optional” in regulated states. citeturn4search0turn4search3turn4search8
In the EU, MiCA creates a harmonized regime for CASPs and includes consumer-protection, asset safeguarding, and complaints handling expectations, while ESMA warns firms not to blur regulated and unregulated product lines. citeturn5search2turn5news40 In the UK, firms in scope must register for crypto AML compliance and mortgage business is subject to MCOB. citeturn5search1turn5search8
AML/KYC, sanctions, and reporting
Mortgage-plus-crypto products frequently stack AML obligations: standard mortgage AML plus crypto VASP-style controls. FATF’s guidance and targeted updates highlight supervisory expectations for a risk-based approach to virtual assets and for Travel Rule implementation. citeturn10search3turn10search7turn10search11 FINTRAC explicitly defines “dealing in virtual currency” and publishes guidance on Travel Rule requirements, while MAS Notice PSN02 sets AML/CFT controls for DPT service providers. citeturn6search0turn6search8turn6search11
Consumer protections and disclosures
For true mortgages in the U.S., TILA/RESPA integrated disclosures (Loan Estimate and Closing Disclosure) are core protections intended to standardize cost and risk disclosure. citeturn3search5turn3search17 For non-mortgage BTC-backed loans, protections depend more heavily on contract, disclosures, and state lending/consumer protection regimes; California’s DFAL bill text explicitly contemplates required consumer disclosures including fees and charges schedules for covered digital financial asset activities. citeturn4search5turn4search6
Accounting, tax treatment, and lender funding models
Tax treatment for borrowers and lenders
Across jurisdictions, the key borrower tax question is whether posting BTC as collateral is a taxable disposal. In the U.S., IRS guidance establishes that virtual currency is treated as property and general tax principles apply, meaning a loan itself is typically not a taxable event, but a liquidation/sale of collateral can trigger a taxable disposition depending on facts. citeturn8search0turn8search4turn8search12
The UK has unusually explicit guidance for DeFi collateral: HMRC explains that tax treatment depends on whether the collateral transfer results in a disposal; if it does, the disposal occurs at the time collateral is transferred, and later liquidation may not have additional CG consequences because the disposal already occurred; if it does not, liquidation can be treated as the borrower’s disposal via nominee principles. citeturn8search1
In Australia, the ATO treats cryptoassets as CGT assets and notes CGT events occur on disposal; ATO community guidance indicates using crypto as collateral generally does not trigger CGT unless the crypto is disposed of (fact-specific). citeturn8search3turn8search7 In Canada, CRA guidance emphasizes that dispositions (trading for fiat/other crypto, using to buy goods/services, transferring ownership) generally have tax implications, with reporting depending on whether gains are capital or business income. citeturn8search2turn8search6 Singapore’s IRAS guidance covers digital tokens under normal income tax principles for businesses and provides GST treatment for digital payment tokens, including treatment of DPT supplies and loans as exempt supplies in GST terms from 1 Jan 2020. citeturn9search7turn9search0turn9search1
Financial reporting and accounting
For lenders and corporate balance sheets, crypto accounting has evolved materially in the last few years. In U.S. GAAP, FASB’s ASU 2023‑08 requires in-scope crypto assets to be measured at fair value with changes recognized in net income, effective for fiscal years beginning after Dec. 15, 2024. citeturn10search12turn10search4turn10search0 Under IFRS, the IFRS Interpretations Committee concluded holdings of cryptocurrencies generally meet the definition of an intangible asset under IAS 38, unless held for sale in the ordinary course of business (IAS 2 inventory). citeturn10search1turn10search9 These accounting treatments influence lender capital strategy, disclosed earnings volatility (if crypto is held on balance sheet), and collateral management policies. citeturn10search4turn10search1
Lender capital and funding models
Post‑2022, centralized lenders appear to have shifted toward tighter collateral standards and more institutional capital sources. Galaxy Research notes un(der)collateralized lending became less common after 2022 credit implosions, with surviving firms “self-regulating,” tightening internal risk controls, and emphasizing collateral quality and transparency. citeturn23view0 This aligns with product changes emphasizing segregated custody, rehypothecation limits, and conservative LTV structures. citeturn14search1turn21search8turn14search30
For banks and bank-adjacent entities, prudential standards constrain how large crypto-lending books can become on regulated balance sheets. The Basel Committee’s prudential treatment of cryptoasset exposures and related supervisory commentary emphasize conservative capital treatment and exposure limits for higher-risk cryptoassets. citeturn10search2turn10search18turn10search22 In Canada, OSFI similarly sets out capital and liquidity treatment expectations for crypto-asset exposures for federally regulated institutions, effective in fiscal Q1 2026. citeturn7search3turn7search7
A practical implication is that many “Bitcoin-backed mortgage” structures in the near term may remain non-agency / non-QM or private-bank / qualified-client products (and/or may rely on specialized funding partners), because conforming channels and prudential constraints can be slower-moving than fintech product experimentation. citeturn18view0turn19search1turn5news40turn23view0
Galaxy’s Q3 2025 breakdown provides an anchor for “market size estimates” in this segment: total crypto‑collateralized lending at $73.59B, DeFi apps at $40.99B, and CeFi open borrows at $24.37B (with the remainder attributable to crypto‑collateralized CDP stablecoin debt by subtraction from the stated total). citeturn23view0