A new wave of mortgage products is letting cryptocurrency holders tap the appreciation in assets like Bitcoin and Ethereum to finance home purchases without triggering a taxable sale. The most visible example is Milo, a licensed mortgage lender in 10 states that has formalized a “dual‑collateral” mortgage structure intended to solve the core tradeoff many crypto holders face: use gains to buy a house or keep exposure to an asset class that has produced outsized returns.

How the product works

• Borrowers post cryptocurrency as collateral while Milo records a traditional mortgage lien on the property. The borrower keeps title to the crypto; Milo’s credit risk is secured both by the home (standard lien priority) and the crypto collateral.
• Because the crypto is not sold, the borrower avoids a capital gains event at closing. Loan proceeds flow in fiat or conventional mortgage form, enabling property acquisition without liquidating digital assets.
• The arrangement is dynamic with built‑in risk management: if the crypto collateral declines and LTV thresholds are breached, borrowers can (a) add more crypto collateral, (b) pay down part of the loan, or (c) accept partial liquidation of the crypto collateral by Milo to restore required ratios.

Why the structure matters

• Tax efficiency: For many holders, avoiding a sale preserves tax-advantaged positioning and time-based compounding of upside potential. That plays to the psychology and balance-sheet priorities of long-term crypto investors.
• Asset‑class leverage without conversion: Instead of converting crypto into cash (and crystallizing gains), borrowers can monetize upside while remaining exposed to future price movements, subject to margin mechanics.
• Blending conventional mortgage mechanics with crypto-specific risk controls produces a hybrid product that mortgage underwriters and regulators can map to existing frameworks (lien priority, escrow, foreclosure processes) while overlaying oracle pricing, custody and liquidation protocols.

Operational and risk considerations

• Volatility risk: Crypto collateral introduces intraday and multiday price swings that typical mortgage underwriting doesn’t accommodate. Lenders must set conservative initial loan‑to‑value (LTV) caps and fast, automated margin/recall mechanisms.
• Pricing oracles and custody: Reliable, auditable price feeds are required to trigger margin calls and liquidations. Custody solutions need to be institutional‑grade with clear transfer and liquidation protocols to avoid operational slippage.
• Legal and lien interplay: A mortgage lien on the property is well understood; the crypto collateral agreement must be similarly enforceable under state law. Priority disputes, cross‑jurisdictional custody, and bankruptcy treatment of crypto remain areas of legal uncertainty.
• Tax and compliance: Although not selling crypto avoids capital gains at origination, downstream events (liquidations, margin enforcement) can generate taxable events. Clear tax counsel and borrower disclosure are essential.
• Liquidity and execution: If the lender must liquidate crypto to protect the loan, market liquidity and slippage could amplify losses. Lenders will price for that risk or maintain conservative buffers.

Market context and regulatory signals
Institutional players are watching. Fannie Mae and Freddie Mac have publicly explored how to treat crypto assets in mortgage underwriting and asset verification, which signals mainstream attention to integrating digital asset holdings into mortgage eligibility. Market acceptance will depend on standardized valuation approaches, regulatory clarity around custody and secured transactions, and a track record of operational robustness in margin scenarios.

Implications for buyers and the mortgage industry

• Access for early adopters: Crypto mortgages lower the barrier for long‑term holders to convert paper gains into real‑world assets like homes without sacrificing on‑chain exposure, potentially expanding the buyer pool in markets with high crypto penetration.
• New lending collateral class: If the model scales, crypto could become a recognized supplementary collateral class. That would force legacy mortgage infrastructure to adapt: automated oracle systems, crypto custody integrations, and new loss‑mitigation playbooks.
• Pricing and product design: Expect conservative LTVs, higher margin buffers, and tighter covenant triggers compared with equivalent cash‑or‑securities‑backed loans. Pricing will reflect both crypto price volatility and the operational cost of custody/liquidation.

Milo’s productization in 10 states is a tactical step that tests borrower demand and operational designs in manageable regulatory environments; broader rollouts will hinge on how lenders refine margin triggers, manage settlement risk and convince regulators that crypto collateral can be treated reliably alongside traditional securities. Source: https