The news: The online mortgage lender Better and Coinbase have announced a crypto-backed loan product that consumers can use to fund down payments for conforming mortgages. It will allow borrowers to pledge Bitcoin and USDC as collateral, with more eligible assets to come.

How it works: This is a standard conforming mortgage, underwritten to Fannie Mae standards and originated by Better. The home remains the collateral. The wrinkle is in the down payment: Instead of making a cash down payment, the borrower takes a loan that is collateralized by Bitcoin or USDC.

This means that the borrower ends up with two loans: a traditional, Fannie-backed mortgage and a crypto-backed down-payment loan. This structure lets them retain their crypto exposure and avoid capital gains taxes that would result from selling. It also includes safeguards designed to protect borrowers from a drop in the value of their underlying crypto holdings.

Zoom out: This two-tiered structure is unusual. While traditional assets are sometimes used as collateral for general-purpose loans. They're not typically tied directly to mortgage down payments, which is intended to reduce risk for both lender and borrower. The crypto-backed loan adds leverage: Although Fannie Mae isn’t exposed to the down payment loan itself, any financial strain from that loan could increase the risk of missed mortgage payments.

Implications for lenders: Fully crypto-backed mortgages are scarce, though at least one niche player (Milo) offers them. The main barrier is volatility: Home values are relatively stable compared to cryptocurrencies. Stablecoins may offer a more viable path forward, enabling direct down payments as the traditional and decentralized financial systems merge. The risk is much lower, and the approach may appeal to crypto-native consumers.

Go deeper: Read our March 2025 report US Home Lending Trends 2025.