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

The bank points to the rise of crypto-backed mortgages and financing of digital property purchases.

By Oliver Knight, Will Canny

Jun 29, 2022 at 12:13 p.m. UTC

Updated Jun 29, 2022 at 1:54 p.m. UTC

Citigroup office in Canary Wharf (Mitch Hogde/Unsplash) — Citigroup's offices in Canary Wharf in London (Mitch Hogde/Unsplash)

Oliver Knight

Oliver Knight is a CoinDesk reporter based between London and Lisbon. He does not own any crypto.

Follow @OKnightCrypto on Twitter

Will Canny

Will Canny is CoinDesk's finance reporter.

Banking giant Citigroup 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 titled "PropTech: Towards a Frictionless Housing Market?" dated this month.
The note describes 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 some crypto-backed mortgage products in March with requirements for borrowers to put up 100% of collateral.
Four months before 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 The Sandbox's LAND being able to obtain a loan via third parties by using already owned LAND as collateral. LAND is a piece of digital real estate on metaverse The Sandbox.

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