
Ep 45. First Bitcoin Mortgageš
Milo! Crypto Mortgage. Bitcoin ATM. Coinbase lawsuit.
Hey yāall!
I hope you had a terrific week! Iām visiting New Jersey this week. I checked into my hotel, walked towards the elevator when I ran into this:
This is a first! Iāve seen Bitcoin ATMs before but never in a hotel. The narrative Iād heard was that there are 2 main sets of Bitcoin ATM users in the US. The first set are immigrants. They buy and send Bitcoin as a means of sending and saving funds for loved ones in their home countries ex Venezuela, Mexico and Nigeria. This is particularly helpful for people who might be undocumented migrants in the US - they may not be able to have a conventional bank account. The second set are people who value anonymity. They like to use cash to buy Bitcoin.
Have you used a Bitcoin ATM? If yes, what was your use case? What was your experience?
Personally, I donāt love them because the fees are way higher than crypto exchanges. I am curious about the economics of owning Bitcoin ATMs. Might be a interesting side hustle to pursue. Maybe Iāll do a deep dive to investigate assess first.
On my mindš§
Introducing the worldās first Bitcoin mortgage: Milo! š
Background
Milo! Depending on where you grew up, the word āMilo!ā evokes memories of a sweet chocolatey drink ā or the 10th mayor of Tel Aviv. Iām in the first group. Yum!
Milo Credit is a global digital bank founded in 2018 to reshape mortgages for global consumers. Most people around the world donāt have access to a mortgage. They often never own a home. Many of those that do gradually build a house painstakingly over years as their funds allow.
This month, Milo Credit launched the first Bitcoin mortgage. They are offering 30-year mortgages up to 100% of the house cost as long as you provide surplus Bitcoin collateral. The interest rates are low and payment plans are flexible and adjustable.
So for example, if you wanted to buy a $200k condo, you might be required to provide $300k Bitcoin collateral. Milo establishes a minimum LTV (loan-to-value) - itās 67% ($200k/$300k) in this example . My guess is that you would get a lower interest if you provide significantly higher collateral.
But thatās not all. We all know that the price of Bitcoin can be volatile. Milo would monitor the LTV ratio as the price of Bitcoin evolves. Milo would set a LTV ratio at which the borrower would need to either provide more Bitcoin or pay down the loan. Milo might also set an LTV ratio at which the borrower goes into default or loses the collateral. Iād love to learn more about the fine prints.
So continuing the example, if the price of Bitcoin dropped by 50%. The LTV ratio would then become $200k/$150k = 133%. Iām guessing Milo might set the limit for the LTV around 80-100%. This would trigger the borrower to provide more collateral to bring the loan LTV back into balance or risk a default.
Takeaway
Look, no one wants to be this guy:
The Bitcoin Mortgage is NOT a mass-market product. Itās targeted at the lucky few who have bags of Bitcoin but donāt want to sell the underlying asset. It makes sense not to sell today if you believe the value will rise over the next 30 years.
But the devil will be in the details. Iām keen to understand the terms and conditions of the mortgage. The lending risk is somewhat mitigated by the fact that the bank could repossess the house if the value of Bitcoin crashed.
This is an important first step. We still have a long way to go before uncollateralized crypto loans are possible and we are able to extend mortgages to people who donāt have access today. We will get there!
Newsš°
1. Coinbase is subject to class-action lawsuitšØ
3 individuals who purchased crypto through Coinbase have filed a class action lawsuit against the firm. They allege that Coinbase operated as an unregistered securities exchange because they claim that 79 of the tokens listed on the website are securities.
This lawsuit is not unexpected. The Chair of the SEC is thought to hold the view that many tokens/cryptocurrencies except Bitcoin, Ethereum, dollar-backed stablecoins are securities. If this is true, then Coinbase and other crypto exchanges would be required to register as securities exchanges and adhere to additional requirements.
I donāt think there is cause for extreme alarm. This is bigger than Coinbase. I hope this lawsuit nudges the industry closer to achieving clarity and supportive legislation.
2. Crypto goes to Congress: Dems split ššŖ
Democratic party is split on crypto. But itās not progressives vs centrists. The progressive wing is split. On one hand, Sen Elizabeth Warren is a vocal opponent concerned about consumer protections. On the other hand, folks like Rep Ritchie Torres (NY) are embracing the potential to reach the unbanked and cut lower the cost of services.
I liked this quote from Rep Torres:
āThe project of radically decentralizing the internet and finance strikes me as a profoundly progressive causeā¦.You should never define any technology by its worst uses. ... Thereās more to crypto than ransomware, just like thereās more to money than money laundering.ā
This week, Congress questioned leading crypto experts on the potential of Russia to use crypto to launder money and evade sanctions. TLDR: No evidence to suggest that this happening at scale. Hereās the link if you are curious:
3. 68% of US millionaires own crypto šøš°š²
Survey from Motley Fool finds that we are in good company!
Bitcoin is preferred. 60% of US millionaires own some Bitcoin while 50% of them own Ethereum. Turns out they arenāt immune to memecoins with 86% saying they had invested in the likes of dogecoin and Shiba-Inu
Looking ahead, 59% expect to allocate more of the portfolio to crypto over the next 5 years while 50% of those who donāt currently own any crypto plan to buy some within the next year.
Public Service Announcement: Itās less than a month before Tax Day. Commiserations to my crypto trading friends. Let me know how it goes and what tools helped you.
O dabo
Afo