Recently, the Federal Housing Finance Agency has directed Fannie Mae and Freddie Mac to consider a proposal that would allow certain cryptocurrencies to be treated as assets when assessing a borrower’s reserves. These digital holdings, so long as they are stored on a regulated U.S. exchange, may be counted toward a borrower's financial readiness, and most importantly, without conversion to U.S. dollars.
What makes this proposal so concerning is that Fannie Mae and Freddie Mac are not mere private entities, but government-sponsored enterprises. Their endorsement carries weight and influence across the financial spectrum. If they begin to underwrite loans with crypto-based reserves, banks and lenders will follow suit, and a meritless fringe practice becomes mainstream.
It begs the question: is this policy shift driven by sound judgment or by the hope that innovation alone can overcome instability? Innovation is not a substitute for caution, especially when the stability of the housing market, the very foundation of middle-class wealth, is at stake.
Before the 2008 financial crisis, we saw a deterioration in the basic art of credit assessment. Lenders abandoned verification, investors ignored risk, and mortgage originators operated under the cheerful assumption that the price of housing could never decline. It was, to borrow a phrase by famed economist John Maynard Keynes, “a triumph of hope over experience.”
In a world increasingly seduced by abstraction, we must return first to principles. Real wealth is grounded in utility, productivity, and the confidence that tomorrow will be shaped by something firmer than speculation. Crypto, however ingenious in its architecture, is not the foundation upon which to build a mortgage market.
The housing crisis of 2008 was not inevitable. It was the result of bad policy, poor incentives, and the abandonment of old-fashioned vigilance. If cryptocurrency is allowed to play the same role in distorting underwriting standards that liar loans once did, we may find ourselves repeating history.
If Fannie Mae and Freddie Mac proceed down this unsteady path of allowing speculative digital assets to distort the careful calculus of mortgage underwriting, we must ask: can your community association truly withstand another systemic shock?
Learn more about the risks of cryptocurrency as an asset here: New Name, Same Risks: How Cryptocurrency as an Asset for Mortgages Can Go Wrong