Citi Flags Crypto-Backed Real Estate Mortgages Amid Falling Market Conditions

Banking giant Citigroup (C) has made a series of comments on mortgages backed by cryptocurrencies and the rise of digital real estate in the metaverse amid a pullback in the crypto markets.

• “Recently, a new crypto-adjacent mortgage product has gained prominence with a straightforward motivation: allowing crypto investors to utilize their investment gains to secure a loan without incurring the tax event,” Citi wrote in a research paper named ‘PropTech: Towards a Frictionless Housing Market?’.
• The note goes on to describe how crypto investors can collateralize crypto holdings that at least covers the cost of a property before being issued a loan.
• “If the value of cryptocurrency declines, the borrower may be subject to margin calls and ultimately the cryptocurrency may be liquidated if the collateral value falls below a certain threshold, such as 35% of the property value,” Citi added.
• Figure Technologies unveiled a series of crypto-backed mortgage products in March with requirements for borrowers to stump up 100% of collateral.
• Four months prior to that, crypto lending platform Ledn raised $70 million at a valuation of $540 million with plans to create a bitcoin-backed mortgage product.
• Citi also described how financing similar to mortgages may be developed in the metaverse, with prospective buyers of Sandbox LAND being able to obtain a loan via third parties by using already owned LAND as collateral.