Hello
Pakistan just pledged to "never sell" their Bitcoin. Ukraine wants crypto reserves during wartime. Brazil considering 5% of forex in BTC. When struggling economies all reach for the same digital solution, are we watching innovation or desperation?
Check out Tuesday’s edition to know more.
Secure Your Life ... But in Bitcoin
Yeah, we didn’t think those words went together either. But here comes Meanwhile flipping the script.
With Meanwhile, you pay your premium in Bitcoin, then borrow against it later without selling. Yup, no tax, no selling pressure, no drama.
Here’s the alpha
You lock in BTC today
It moons tomorrow 🚀
You borrow against it, no capital gains tax
You stay insured, and stay winning
It's like hodling with benefits.
👉 Check out Meanwhile, your future self (and wallet) will thank you.
Credit Embraces Crypto 🫂
There is an irony in modern finance. You can hold $400,000 worth of Bitcoin but struggle to get approved for a $300,000 mortgage. Your digital wealth can make you rich on paper, but somehow invisible when you actually want to buy something substantial, like a house. Even more so, if you don’t already have a solid credit history.
Makes me wonder about this absurdity: when the wealth is real, why isn't the recognition?
On Monday, the absurdity took a step closer to resolution.
Bill Pulte, the newly minted Director of the US Federal Housing Finance Agency, fired off a tweet.
Within hours, the crypto elite were queuing up to help.
Michael Saylor pitched his Bitcoin credit model. Jack Mallers from Strike volunteered to bring Bitcoin-backed mortgages "to life in America."
The writing is on the wall: credit, as we know it, is changing fast and is warming up to embrace crypto in newer ways with each passing day.
The 28 Million Ghosts
America has roughly 28 million adults who regulators categorise as "credit invisible." They exist in the economy: they work, they earn, they spend, but they don't exist in the eyes of banks. No credit cards, no student loans, no mortgage history. Just financial phantoms with perfectly good money but no Fair Isaac Corporation (FICO) scores to prove it.
The scale of this exclusion becomes clearer when you consider that lenders are missing out on roughly 20% growth in credit-seeking consumers in the US by not opting to add alternative data along with traditional scoring models, according to Tom O'Neill, Senior Advisor at Equifax.
Meanwhile, about 55 million Americans hold cryptocurrency. This population could include a substantial set of people who are asset-rich in crypto but credit-poor in traditional systems.
Think of immigrants who avoided debt, young professionals who never needed credit cards, or global entrepreneurs who get paid in digital assets. Someone might hold more than enough Bitcoin yet not qualify for a mortgage because their wealth doesn't register in FICO's traditional scoring system.
The irony is that traditional banks have already started recognising this problem.
In 2023, JPMorgan Chase, Wells Fargo, and U.S. Bank launched a pilot programme that challenged decades of credit card underwriting process. These lenders began approving credit cards for consumers by analysing their account activity: checking and savings balances, overdraft history, and spending patterns, instead of requiring traditional credit scores.
Early results showed that many excluded consumers were actually quite creditworthy and they simply had the wrong sort of financial history.
The logical next step? Recognising crypto holdings as another form of alternative data. After all, if your bank balance, equity and bond portfolios matter for evaluating your creditworthiness, why shouldn't your Bitcoin balance?
The scale of this disconnect becomes clearer when you look at the numbers. The global lending market represents one of the largest financial sectors worldwide, valued at $10.4 trillion in 2023 and projected to reach $21 trillion by 2033.
On-chain lending accounts for a mere fraction (0.56%) of the opportunity.
Even focusing just on housing, the institutions under the Federal Housing Finance Agency’s (FHFA) purview provide more than $8.5 trillion in funding for the US mortgage markets and financial institutions.
If crypto assets could be properly integrated into this mainstream market, you're looking at a potentially enormous influx of recognised collateral and participants.
Instead of forcing crypto holders to sell their assets to qualify for mortgages, lenders would recognise digital holdings as legitimate collateral or proof of wealth.
Under today's rules, buying a $400,000 house means liquidating your crypto, triggering capital gains taxes, and forgoing any future appreciation on the asset you could have held. That’s like being punished for having the wrong sort of money.
Under a crypto-inclusive framework, you could use your Bitcoin holdings as collateral without selling, avoid taxable events, and keep your digital nest egg intact whilst mortgaging it for real estate.
Some companies are already doing this in the private sector.
Milo Credit, a Florida-based fintech, has issued over $65 million in crypto-backed mortgages.
There are a few others offering Bitcoin-backed mortgages, but these are happening in silos. Some of them also operate outside the Fannie Mae/Freddie Mac system, meaning higher interest rates and limited scale. Pulte's announcement could bring this into the mainstream.
The Modernisation Imperative
Traditional credit scoring is antiquated. Banks look backwards at payment history while ignoring forward-looking indicators of wealth.
Some DeFi protocols are already experimenting with on-chain credit scoring.
Cred Protocol and Blockchain Bureau analyse wallet transaction histories, DeFi protocol interactions, and asset management patterns to generate credit scores based on demonstrated financial behaviour.
Someone with steady on-chain transaction history and a healthy crypto portfolio might well be more creditworthy than someone with maxed-out credit cards, but current systems simply can't see that. Progressive lenders are already experimenting with alternative data: rent payments, bank balance trends, utility bills.
So, what’s stopping crypto holdings-backed mortgages from taking off? Well, there’s a catch.
Crypto's notorious volatility could transform mortgages into margin calls.
Bitcoin dropped roughly two-thirds between November 2021 and June 2022. If your mortgage qualification depends on crypto holding of 1 BTC worth $105,000 today, what happens when it's worth $95,000 tomorrow? Your creditworthy borrower suddenly becomes a default risk through no fault of their own.
Scale that across millions of loans, and you've got the makings of a proper crisis.
All this feels familiar though.
In 2022, European Central Bank official Fabio Panetta noted that crypto markets had grown larger than the $1.3 trillion subprime mortgage market that triggered the 2008 crisis. He observed "similar dynamics" between the traditional and the crypto market: rapid growth, speculative fervour, and opaque risks.
During bull markets, crypto wealth can appear and vanish with remarkable speed. Aggressive lending based on inflated portfolio values could recreate the same boom-bust cycle that devastated housing markets seventeen years ago.
Token Dispatch View 🔍
Even if the FHFA moves forward, and while Pulte has offered no timeline or specifics yet, the practical obstacles are daunting. How do you value volatile assets for loan purposes? Which cryptocurrencies qualify? Just Bitcoin and Ethereum? What about stablecoins? How do you verify ownership without enabling fraud?
Then there's the scenario of foreclosure: if a borrower defaults, can banks actually seize crypto collateral? What if the borrower claims their private keys were "lost in a boating accident"? Traditional repossession involves sending bailiffs to collect physical assets. Crypto repossession involves... well, just some digital alphanumeric keys.
Some of these challenges are being tackled by protocols developing under-collateralised lending. Platforms like 3Jane have developed "credit slashing" mechanisms that bridge the gap between pseudonymous borrowing and real-world accountability. Their approach allows borrowers to maintain privacy initially, but defaults trigger a process where collections agencies can access real-world identities and pursue traditional debt recovery methods, including credit reporting and legal action. Borrow pseudonymously, but default at your own peril.
For crypto holders, Pulte's announcement represents long-awaited validation. Your digital assets might finally count as "real" wealth in the eyes of mainstream finance. For the housing market, it could unlock a new wave of buyers who've been excluded by outdated qualification methods.
But the execution will determine whether this becomes a bridge to financial inclusion or a pathway to the next crisis. The integration of crypto into mortgage lending requires the sort of careful risk management that the financial industry isn't always known for.
The walls between crypto and traditional credit are beginning to crumble. Whether what emerges is a stronger, more inclusive financial system or a more fragile house of cards will depend on how carefully we build the bridge between these two worlds.
That's it for this week's deep-dive. See ya next week.
Until then … stay curious,
Prathik
Token Dispatch is a daily crypto newsletter handpicked and crafted with love by human bots. You can find all about us here 🙌
If you want to reach out to 200,000+ subscriber community of the Token Dispatch, you can explore the partnership opportunities with us.
Fill out this form to submit your details and book a meeting with us directly.
Disclaimer: This newsletter contains analysis and opinions. Content is for informational purposes only, not financial advice. Trading crypto involves substantial risk - your capital is at risk. Do your own research.