In the report focusing on how new tech could change the housing market, Citigroup explored crypto-backed mortgages and the rise of digital real estate.
an opportunity that simplifies the time-consuming process that requires borrowers to provide documents such as tax returns and bank statements to secure a loan.
The report indicated that if the crypto collateral declines in value, for instance, the borrower would be subject to margin calls when the asset has dropped below a certain threshold. In this way, the borrower is at relatively high risk of having his asset liquidated during violent market pullbacks.In return, the borrower is eligible to receive a loan that does not incur capital gains while remaining exposed to upside potentials in the crypto portfolio.
“With this requirement and awareness of crypto’s high volatility in mind, it could be challenging to make a primary ability-torepay determination over the life of the loan based off crypto reserves. This issue may be compounded if the payment rises in the event of a downturn in cryptocurrency prices.”In addition to purchasing physical property through crypto loans, the report commented on the potential ahead of “digital real estate” in the metaverse.
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