Some powerful senators are sounding the alarm about a plan to let people use cryptocurrency to buy houses. This could shake up both the housing and financial markets.
The Problem with Crypto in Mortgages
A group of senators, including Elizabeth Warren and Bernie Sanders, are worried about a new rule that would allow people to use their unconverted crypto (like Bitcoin or Ethereum) to qualify for a mortgage. Their main concern is the extreme volatility of crypto. The value can swing wildly, meaning someone could easily owe more than their crypto is worth, leading to loan defaults.
Another big issue is liquidity. It can be hard to quickly sell crypto, especially in an emergency. Plus, crypto is vulnerable to theft and scams, unlike money in a bank account. The senators argue that this is a recipe for disaster.
The Proposal: Crypto as Collateral
The proposal, from the Federal Housing Finance Agency (FHFA), would let Fannie Mae and Freddie Mac consider unconverted cryptocurrency as assets when assessing mortgage risk. This is a big change, as lenders usually only look at cash or easily-sellable assets.
While some, like former Binance CEO Changpeng Zhao, are celebrating this move, the senators see it as incredibly risky.
A Clash in Washington
This debate is happening as the US government is still figuring out how to regulate crypto. Some want stricter rules, while others believe the industry is mature enough for wider use in finance. For now, the rule is just a proposal, not a law, but it’s already causing a lot of friction. It highlights the tension between those who see crypto as the future and those who see it as too risky for such a crucial part of the economy like housing.