Stablecoin Mortgage Payments

QUESTION 

I have been reading your articles about cryptocurrency and mortgage banking. Thank you for providing these articles. I have shared your website with many people, and I get the hard copy of your articles, which I use in our management meetings. 

I am a member of senior management and on the Board. We are a large lender and servicer in the northeast, with offices in almost all states. Recently, our servicing CFO asked the Board to consider accepting stablecoins for mortgage payments. Our attorneys gave us a demonstration of the various legal complexities. But I want a high-level outline, such as only you can do! 

You should know that most of the Board was not convinced that now is the time to adopt stablecoins (or any crypto) for mortgage payments. We have also been researching crypto-backed mortgages, which seems like a path some of us want to follow. I'm interested in your thoughts on allowing borrowers to make mortgage payments in stablecoin. Maybe, also, you could tell us what you think about crypto-backed mortgages. 

Should lenders accept stablecoin for mortgage payments? 

Are crypto-backed mortgages a better option? 

COMPLIANCE SOLUTION 

CMS Tune-up 

RESPONSE 

The idea of lenders accepting stablecoin for mortgage payments is emerging. Still, it is not a widespread practice and carries significant risks that have prevented adoption by most traditional financial institutions. Some Fintech companies, however, are exploring crypto-backed mortgages, which typically use stablecoins as collateral rather than for monthly payments. For traditional lenders, the risks involved generally outweigh the benefits. 

Please get in touch with me to discuss your plans. Legal risk is only one of several risk variables. We can help you develop rollout implementation strategies. The issues involved cover a wide range of variables, such as legal, regulatory, interest rate, liquidity, operational, market, compliance, reputational, strategic, and prepayment risks. Please view my response as a conversation starter. 

Here are some recent articles I have published on cryptocurrency vis-à-vis mortgage banking. 

·       GENIUS Act: Fool's Gold, 

·       GENIUS Act: Mortgage Banking Ambush, 

·       Cryptocurrency: Risks to Mortgage Banking, 

·       Cryptocurrency Dilemma, and 

·       Challenges of Cryptocurrency Compliance.  

Two types of lenders 

There are two types of lenders in crypto-related mortgage banking. These are: 

Traditional Lenders: Traditional financial institutions are highly regulated and cautious with cryptocurrencies. They typically require that any crypto used for mortgage transactions—including stablecoins—be liquidated into U.S. dollars and held in a verifiable bank account for a period of 30 to 120 days. 

Fintech Crypto Lenders: A niche market of Fintech firms that specialize in crypto-backed mortgages. These lenders offer loans secured by cryptocurrency collateral, often including major stablecoins. Borrowers pledge their crypto assets, and the lender issues the loan in fiat currency. 

Whether a lender should accept stablecoin payments depends on their risk tolerance, regulatory environment, and technological capabilities. 

·       For traditional banks, the regulatory and operational hurdles are high, and the risks often outweigh the potential benefits. Federal mortgage regulations and investor demands for stable, traditional assets reinforce their current cautious approach. 

·       For a niche Fintech lender, the calculation is different. By specializing in crypto-backed loans, they build the necessary infrastructure and accept the higher risks for a target demographic. 

For most borrowers, the most practical approach today is to convert stablecoins into cash well before applying for a mortgage through a traditional lender. As the regulatory landscape and market maturity evolve, perhaps the widespread acceptance of stablecoin mortgage payments may become more common.

GENIUS Act: Fool's Gold

QUESTION 

In the last few weeks, you have been dealing with the controversial subject of cryptocurrency and the GENIUS Act regarding its impact on mortgage banking. I have been worrying about something since the legitimization of cryptocurrency started. 

I am probably the least likely to bring up my concerns about it since I am the CEO of a large lender that would definitely make thousands of mortgage loans if crypto can be used in the loan transaction. But I do not want to originate unstable mortgages! 

I'm not a fool, and I do not want to originate loans based on the modern equivalent of Fool's Gold. 

I sense there is a rat in this stablecoin initiative. And, like so many other things in our government, I think that rat may be people who are going to get superrich, and especially the president of the United States. By the way, I am not a Democrat. I have voted Republican my whole life. I'm sure both Democrats and Republicans are also going to make significant profits in crypto transactions. 

My spider-sense is telling me this is all more than a stablecoin solution to a problem that, as far as I can tell, doesn't exist. I am concerned about politicians profiting at the risk of mortgage lenders. So, I am hoping you could tell us your view of how President Trump and other politicians will benefit financially in the stablecoin era. 

How can the President and other politicians benefit personally from the GENIUS Act? 

SOLUTION 

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Compliance Management System
Second Line of Defense

RESPONSE 

In the huge response I have gotten to my recent articles on cryptocurrency and the GENIUS Act – respectively, Cryptocurrency: Risks to Mortgage Banking and GENIUS Act: Mortgage Banking Ambush – several commenters frame their concerns as "controversial." My view, though, is that controversy can be a fearful way to avoid truth. We should stay calm, not get angry, and rationally evaluate an issue. 

Thomas Carlyle paraphrased the Buddha when he said

In a controversy, the instant we feel anger, we have already ceased striving for the truth and have begun striving for ourselves. 

Ultimately, the essence of disputes and our reactions to them can be understood better when we emphasize the importance of seeking truth over personal gain. Thus, I am not concerned about controversy because I strive to resolve issues in a clear, unbiased, factual, and rational way. 

Politicians of both parties seem to be quite bewitched by digital assets in general, and stablecoins in particular. Indeed, one hundred Democrats in the House voted for the Genius Act, many in the Democratic Party leadership. And in the Senate, eighteen Democrats voted for it. Virtually all the Republicans voted for the Genius Act in the House and Senate.[i] 

I can't blame you for being skeptical of the crypto legislation. However, as I stated in my previous articles, there are several positive and negative aspects to consider. That said, unfortunately, some persons may stand to benefit financially. Just like on Wall Street, sometimes insiders can exploit financial opportunities. Congress is no exception. There have been several legislative attempts to prohibit congressional members from trading individual stocks and to prevent financial conflicts of interest. The Democrats have introduced each of them, and nearly all Republicans have opposed them. The most recent legislative effort was introduced by Democrats again in May 2025, called the Ban Congressional Stock Trading Act. 

I'm not so sure you should single out President Trump for special attention. Perhaps his potential gain from the stablecoin legislation is an example of how a system can lead to undesirable consequences. 

Stafford Beer, the British theorist, famously said 

The purpose of a system is what it does. 

In other words, a system can have unintended consequences, it can have undesirable consequences, and just relying on its stated goals can be misleading because rhetoric and intentions may be outweighed by actual behavior and outcomes.