Banks are lining up to buy the loans, while lawmakers are asking regulators to shut the idea down. That split captures the debate around a new mortgage experiment from Better Home & Finance and Coinbase, one that puts crypto collateral directly into the home-finance pipeline.
Better CEO Vishal Garg said the problem has been obvious to him for more than a decade. Recalling his own homebuying experience 12 years ago, he said he had to sell assets, realize capital gains, and convert everything to cash before he could pay for a home. "At the time I realized I had to liquidate assets, pay capital gains tax, and turn them into cash to pay for the house. Why couldn’t I pledge assets directly instead of being forced to sell them first?" Garg said in the interview.
He said the order of operations in a real-estate transaction makes the issue worse. Buyers are often expected to show cash before a seller will take an offer seriously, but they may not know whether the offer will be accepted until after they have already sold assets and paid taxes.
How the Better-Coinbase mortgage structure works
In March, Better and Coinbase introduced a structure that lets borrowers pledge Bitcoin or USDC and receive two loans. One is a first-lien mortgage that conforms to Fannie Mae standards. The second is a separate private financing loan used for the down payment, backed by crypto collateral and coupled with a second lien on the home.
The Wall Street Journal reported the same day that Fannie Mae had, for the first time, accepted crypto-backed mortgage loans. In early June, a couple in their early 30s in Ann Arbor, Michigan, completed the first loan under the structure.
Better said that before the product’s formal summer launch, the waitlist represented about $250 million in potential loan volume. It also said 41% of applicants did not have enough cash to cover a down payment.
Asked who would ultimately take these assets onto their books, Garg said: "These assets meet bank investment standards. Multiple banks are already lining up to buy and take on these loans, including some of the largest banks in the U.S." He sees that as an important route for digital assets to enter the banking system.
Collateral ratios define who can use it
The product’s economics are shaped by its collateral rules. A borrower using Bitcoin must post collateral equal to 250% of the down-payment loan. A $100,000 down-payment loan would therefore require $250,000 worth of BTC. If the borrower uses USDC, the collateral requirement drops to 125%.
There is no margin-call mechanism in the structure. A decline in Bitcoin’s price does not alter the terms of the mortgage. Liquidation is triggered only if the borrower is 60 days delinquent, a standard Better said matches conventional compliant mortgage lending.
That design points to a specific borrower profile: people with assets but limited liquid cash. Redfin data cited in the article showed that 12.7% of younger homebuyers had recently used crypto assets to help assemble a down payment.
Data from the National Association of Realtors showed the median age of a first-time homebuyer would hit a record 40 by the end of 2025, while first-time buyers’ share of total buyers would fall to a record low of 21%. The Mortgage Bankers Association, citing federal loan data, disputed that figure. Census data showed the homeownership rate for people under 35 was just 35.2% in the second quarter of this year.
Digital collateral has precedents outside housing
Using an asset a borrower continues to hold is not entirely new. Doug Ricketts, co-founder and CEO of PayJoy, said on the podcast On The Margin that a smartphone can play a role similar to collateral in a mortgage structure.
"Our original innovation was to make the phone itself the collateral. In some sense, the smartphone is the home in a mortgage business," Ricketts said. PayJoy lends to consumers with thin credit files in Latin America, Africa, and South Asia. If a borrower falls behind, device functionality can be locked, an arrangement often described as a form of digital collateral.
Ricketts also drew a line on pricing. "When lending to low-income borrowers, one model is to charge very high rates, let large numbers of users default, and extract outsized returns from a small number of borrowers. That is not PayJoy’s path," he said. According to the article, PayJoy charges a one-time fixed fee rather than rolling, cumulative interest, an unusual setup in consumer tech lending.
Seven senators asked FHFA to reverse course
The political backlash sharpened on April 30. Seven senators wrote to Federal Housing Finance Agency Director William Pulte, naming Better and Coinbase and urging the regulator to "rescind the relevant approval and prohibit government-sponsored enterprises from taking on crypto-asset-related risk."
The letter was led by Dick Durbin and Elizabeth Warren. Other signatories were Jeff Merkley, Chris Van Hollen, Richard Blumenthal, Bernie Sanders, and Mazie Hirono.
Their central argument targeted the same 250% collateral rule that Better has described as a sign of conservative risk control. The senators wrote: "This mechanism requires homebuyers to produce crypto assets worth as much as 2.5 times the value of the down payment in order to qualify. That in itself is an acknowledgment that crypto assets are high-risk assets; in addition, borrowers must pay interest on two loans at the same time."
The lawmakers estimated that the combined financing cost could run as much as 1.5 percentage points above a standard Fannie Mae mortgage rate. They also warned that "the high burden could encourage borrowers to walk away from repayment altogether, with losses ultimately borne by American taxpayers." The letter asked for a response by May 30, but FHFA has not publicly replied.
In June, Alys Cohen of the National Consumer Law Center and Corey Frayer of Consumer Federation of America published a joint commentary that went further. They argued the federal government "could repeat the mistakes that led to the 2008 foreclosure crisis" and concluded that the product was not consumer-focused financial innovation but the start of a disaster.
Bitcoin volatility hangs over the model
Market action has added another layer of pressure. The article said Bitcoin reached a high of about $123,000 in October of last year, fell back to around $62,800 in February, and spent all of July trading in the $60,000 range, leaving it at roughly half its peak value.
Against that backdrop, even without margin calls, questions around collateral valuation, default handling, and who ultimately bears the risk remain central to the debate.
Garg wants to expand beyond BTC and USDC
Garg said Bitcoin is only the starting point. "Right now we support Bitcoin and USDC. Later we plan to add various mainstream tokenized assets, including tokenized equity in SpaceX, Tesla, Coinbase, Better, Apple, and Amazon," he said.
He added that the project would not support meme coins and would focus only on assets with liquidity and institutional attention. Ethereum and Solana are next in line, he said.
His broader vision goes further. Parents could pledge retirement-account assets to help children buy homes, a direction he linked to the crypto retirement market. Over time, he said, a buyer could simply take a photo of a listing and let software handle the rest. In that setup, an AI agent on Better’s platform would submit the purchase application and calculate a bidding ceiling. Farther out, ordinary users could hold fractions of homes and swap exposure across properties. "Right now the only thing stopping that is the amount of transaction friction," he said.
He tied that view to how younger people build wealth. "Young people today lack assets that can hedge inflation and let them participate in rising home prices," Garg said.
Tokenized equity raises a separate legal question
If the collateral pool expands from Bitcoin and stablecoins to tokenized equity, the legal analysis gets harder. The unresolved issue is what statutory rights, exactly, a token holder possesses. The article described that as a broad problem across the tokenization sector.
Chan Ahn, founder and CEO of Tessera, said on On The Margin that his company launched a tokenized SpaceX product in February. He said plainly that "the platform intentionally does not have a KYC process, and that is not an oversight." The goal, he said, was to lower the barrier to entry because private markets have long excluded most retail investors through paperwork, high minimums, and geographic restrictions.
On the same podcast, Kula co-founder Chris Turner drew a distinction between two structures. Most tokenized assets, he said, represent only a contractual claim on economic benefits and do not amount to direct ownership of the underlying asset. Another model makes the token itself the asset, so holding the token is equivalent to owning the underlying exposure. For mortgage underwriters evaluating collateral, that difference matters.
Better is also trying to lower its own funding costs
At the same time, Better is reshaping how it funds loans. In February, the company struck a deal with Framework Ventures to deploy as much as $500 million through the stablecoin ecosystem Sky. Framework Ventures also invested $45 million for a roughly 10% stake in Better.
Better said the shift could cut its cost of capital by more than 100 basis points. If tokenized funding is fully implemented, the company said customer loan rates could fall below 5%, versus industry rates that are generally above 6%.
That matters for Better’s own finances. In the first quarter, the company originated $1.64 billion of loans, up 89% year over year. Revenue was $47.5 million, but it still posted a loss of about $70 million. Better said it has originated more than $110 billion in loans since 2016. In December 2021, the company laid off 900 employees in a single video call, a move that has continued to draw criticism toward Garg.
Even so, he said the pressure has not changed his commitment to the product. "The worst-case outcome is that we launch and nobody wants it, but that is not what is happening," Garg said. On the broader industry direction, he added: "Instead of only imagining the future, what matters more is building it yourself."