Michael Bodley

<div id="highlights-block_624b6e409e879" class="highlights">
 <ul>
 <li>Product aims to cater to a growing number of bitcoin millionaires who don’t want to incur capital gains taxes by selling their bitcoin to fund a conventional mortgage</li>
 <li>The expansion is the latest business line for the company, which started as a proprietary crypto trading operation</li>
 </ul>
 
</div>



A cryptocurrency market-maker is set to fund its first bitcoin-backed mortgage as demand grows for institutional solutions for digital asset whales looking for alternatives to traditional finance.&nbsp;



XBTO plans to finalize a multi-million dollar mortgage in Miami in the coming weeks, with bitcoin as the loan’s collateral. It’s one of the first such instances as the market for crypto-based lending booms. 



Though the firm — which started as a proprietary trading operation, before expanding to other business lines — will require know-your-customer checks and credit scores, there are advantages, including not having to sell bitcoin and incur capital gains, for investor clients.&nbsp;



Joe Haggenmiller, XBTO’s Miami-based head of markets, told Blockworks the program would provide underwriting to those who might otherwise not be eligible, including foreign nationals.&nbsp;



<div class="wp-block-image"><figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="300" height="300" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/04/Joe-Haggenmiller.jpg" alt="" class="wp-image-19836" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/04/Joe-Haggenmiller.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/04/Joe-Haggenmiller.jpg?w=150 150w, https://blockworks-co.imgix.net/wp-content/uploads/2022/04/Joe-Haggenmiller.jpg?w=257 257w, https://blockworks-co.imgix.net/wp-content/uploads/2022/04/Joe-Haggenmiller.jpg?w=261 261w, https://blockworks-co.imgix.net/wp-content/uploads/2022/04/Joe-Haggenmiller.jpg?w=219 219w, https://blockworks-co.imgix.net/wp-content/uploads/2022/04/Joe-Haggenmiller.jpg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/04/Joe-Haggenmiller.jpg?w=50 50w" sizes="auto, (max-width: 300px) 100vw, 300px" /><figcaption>Joe Haggenmiller, XBTO’s head of markets</figcaption></figure></div>



“We’re solving a problem that people have, either because you’re a foreigner or otherwise can’t get an American mortgage, and you don’t want to sell your bitcoin, but you do want to buy a fancy apartment,” Haggenmiller said.&nbsp;



Borrowers can tap financing worth up to 90% of their mortgage with a 10% bitcoin downpayment on a 15- or 30-year mortgage. Rates, Haggenmiller said, will be comparable to traditional mortgages. He declined to identify a specific range. The idea is to benchmark rates with jumbo mortgages, typically taken out for properties too expensive for a traditional loan.&nbsp;



The bet is a bullish one on bitcoin. Consider that if the cryptocurrency appreciates in value over the course of a mortgage — which analysts deem likely — the homeowner can sell part of their position and make a bigger dent in the outstanding loan. The bitcoin put down, which will undergo know-your-customer (KYC) checks, will be custodied in a yet-to-be-identified solution.&nbsp;



“There’s the old guard of [bitcoin] maxis who never, ever want to sell bitcoin, which could be because they think it’s going to $1 million, could be because they don’t want to take a tax hit,” Haggenmiller said. “They may have it in cold storage and don’t want to give it up. This is a way for them to come in and buy that fancy Miami condo with bitcoin.”



Crypto lender <a href="https://www.milocredit.com/crypto/" target="_blank" rel="noreferrer noopener">Milo</a> is also offering digital asset-backed mortgages, which the company bills as an industry first.&nbsp;



XBTO’s initial offering will be limited to Florida mortgages valued at more than $1 million, reflecting the company’s desire to focus on substantial loan opportunities, versus spreading its vetting resources and personnel thin by keying in on less-valuable properties.&nbsp;



That area is likely to expand over time — and perhaps include additional cryptocurrencies in the future. Another possible, though not immediate, focus: securitizing the loans to tap another pool of financing capital.&nbsp;



The firm is partnering with Columbus Capital, a traditional full-service mortgage provider, to assist in doing due diligence on and underwriting lien holders.



“We’ve wrapped this in what looks like a regular mortgage in terms of not only the product,” Haggenmiller said. “We’re going to get all the docs, exactly the same as a normal mortgage, and the application process and servicing is the same as any mortgage.”&nbsp;



Though XBTO will require the likes of credit scores, Haggenmiller said the company is unlikely to ding, in terms of rates, those with lower financial track records — provided they have the requisite amount of bitcoin to put up as collateral.&nbsp;



The company plans to look for red flags such as a history of missed payments in its vetting process, including —&nbsp;which Haggenmiller dubbed as “thorough.”



XTBO, led by CEO Philippe Bekhazi, has additional business lines including venture capital investments, exchange market-making, equipment financing for miners and over-the-counter trading.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/thebreakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



<li><a href="https://blockworks.co/newsletter/forwardguidance">Forward Guidance</a>: The intersection of crypto, macro and policy.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha directly in your inbox.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/supplyshock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>