The revolution of cryptocurrency mortgage loans! Congressman Lummis proposes allowing Bitcoin and other digital assets as collateral for mortgages, could American housing finance face a huge change?

U.S. Senator Cynthia Lummis of Wyoming has introduced the groundbreaking "21st Century Mortgage Act," aimed at officially incorporating cryptocurrency into the U.S. housing finance system, allowing homebuyers to use Bitcoin and other digital assets as collateral for single-family home loans. This move echoes the Federal Housing Finance Agency (FHFA) policy guidance from June, which aims to enhance economic inclusivity and open new pathways to homeownership for the younger generation. However, the proposal has faced strong skepticism from Democratic lawmakers, who are concerned that the volatility and liquidity risks of cryptocurrencies could impact the stability of the traditional mortgage market. This article provides an in-depth analysis of the bill's content, potential impacts, and the points of contention between the two parties.

Loomis Proposal: Crypto Assets Officially Become Collateral for Mortgages U.S. Senator Cynthia Lummis from Wyoming has introduced a groundbreaking bill that could reshape the way American families finance their homes—the "21st Century Mortgage Act." This bill proposes to recognize cryptocurrency as a legitimate asset class in mortgage applications, allowing digital asset holders to use their crypto assets as collateral when applying for a single-family home loan.

This legislative action closely follows a policy guideline released in June by the Federal Housing Finance Agency (FHFA). The guideline suggests that federal mortgage institutions explore the consideration of Crypto Assets when reviewing mortgage applications. Loomis's bill aims to formally write this guideline into law, making digital assets an official component of the U.S. housing finance system.

Aiming at the younger demographic, promoting economic inclusion and the modernization of wealth accumulation Senator Loomis stated on Tuesday that the bill adopts a modern approach to building wealth. She emphasized that even those who do not invest in digital assets are likely to know someone who holds Crypto Assets. She added that the bill aims to promote economic inclusivity and reflects the current trend of accumulating wealth, especially among younger investor demographics.

Loomis cited a recent report from the U.S. Census Bureau, indicating that by the first quarter of 2025, the homeownership rate for Americans aged 35 and younger is only 36%, far below that of older groups. She argues that allowing crypto assets to be used as collateral for mortgages could open up a new path to homeownership for tech-savvy young Americans.

If the bill is approved, borrowers will not need to convert their held crypto assets into fiat currency. When assessing mortgage applications, the value of crypto assets can be directly appraised or taken into consideration. This will allow homebuyers to qualify for a mortgage without having to sell tokens, thereby avoiding the opportunity cost of missing out on potential asset appreciation.

Democrats Strongly Question: Fluctuation and Liquidity Risks Become the Focus However, this logic has not been recognized by some lawmakers. Senate Democrats oppose the proposal to implement digital assets in the U.S. housing market. They believe that the volatility of crypto assets is too high, liquidity is poor, and it is difficult to predict, making it far from a stable collateral for long-term debts such as mortgages.

In a letter dated July 24, a group of Democratic senators expressed concerns to FHFA Director William Pulte about the potential financial risks of the policy. They warned that even as the cryptocurrency market matures, ongoing fluctuations and liquidity issues could make it difficult for borrowers to close positions in a timely manner or to liquidate crypto assets into cash at price levels that do not support their mortgage obligations.

Lawmakers are calling for a comprehensive risk assessment, suggesting that the FHFA consider the broader impact of digital assets on the traditional housing finance system. They also warned that cryptocurrency-based mortgages could inadvertently drive up housing prices, exacerbate market speculation, or undermine the stability of certain economic sectors in the event of an unexpected crash in cryptocurrency values.

Crypto Assets Legislation Wave: Multiple Bills Advancing Concurrently The Lummis' mortgage bill is one of several cryptocurrency-centered legislations currently being promoted by Congress, reflecting a broader trend in U.S. financial law to incorporate digital assets into regulation and push for their mainstream acceptance.

Representative Loomis also spearheaded another independent bill supported by Republicans, aimed at establishing a comprehensive market structure framework for digital assets. The bill clarifies the regulatory responsibilities of the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), and provides regulatory certainty for crypto exchanges, token issuers, and investors.

Another bill that has garnered attention (especially among conservatives) seeks to prohibit the Federal Reserve from issuing a central bank digital currency (CBDC) based on concerns over privacy and government overreach. The bill has passed in the House of Representatives and may be submitted to the Senate for review in the fall after the August recess.

The House version of the Lumis Mortgage Bill—the "U.S. Homeowner Crypto Modernization Act" was introduced by Congresswoman Nancy Mace on July 14. Mace's legislation requires that if a borrower holds assets in a crypto assets brokerage account, the mortgage institution must take the value of these digital assets into account during the underwriting process.

Global Trend Boost: Australia's Bitcoin Collateral Loans Launched Global dynamics are also fueling this trend. In July this year, Australian company Block Earner announced it will offer Bitcoin-backed collateralized loan services. The launch of this business is attributed to a key ruling by the Australian Federal Court: the court determined that under current legislation, the company's crypto loan products should not be classified as financial products, clearing legal obstacles for them.

Conclusion: Senator Loomis's "21st Century Mortgage Loan Act" marks a critical step for Crypto Assets towards mainstream financial infrastructure, providing new possibilities for the younger generation to leverage digital assets to accumulate wealth and achieve the "American Dream." However, the inherent high Fluctuation and Liquidity risks associated with Crypto Assets pose significant challenges to their stability as long-term mortgage Collateral, becoming a central point of contention between the two parties. Whether the bill can ultimately be passed depends not only on the political maneuvering during the legislative process but also on the regulatory bodies establishing rigorous risk mitigation mechanisms. The global exploration of Crypto-backed mortgages (such as the Australian case) offers a reference for the U.S., but if the vast U.S. housing finance market opens its doors to Crypto Assets, the potential systemic impacts still require careful assessment. Whether Crypto Asset-backed mortgages are an inevitable trend in financial innovation or a premature risk will become a focal point for U.S. policymakers and the market in the coming months.