Second largest US mortgage lender will accept crypto payments this year
fxstreet.com
fxstreet.com
In case anyone's wondering, it was 2,739 BTC, which would be worth around $127M today.
See: https://www.wsj.com/articles/lake-tahoe-property-sells-for-1...
"In 2014 I was buying land in Lake Tahoe and I told the sales guy I'll buy this plot if you let me buy in bitcoin because I wanted to promote bitcoin as a transactional infrastructure. That was 2800 coins. That's worth $140-150M today"
- Chamath
I guess they are trying to piggyback off crypto hype to keep up their meme stonk status.
[1] https://www.bloomberg.com/opinion/articles/2021-03-08/spac-p...
If somebody thinks all SPACs are pump and dumps they probably only learned about them recently through the media
Most of the time, these companies are simply partnering with external firms to process crypto payments, but they're actually taking cash. They'll probably charge you a fee, too, which means no one will actually use it.
These headlines are the equivalent of a company announcing that they'll take debit cards or credit cards as a payment method. They don't actually care how the money arrives, as long as it arrives in their bank accounts.
Restaurant prices around me have gone up anywhere from 25-100% in the last 6 months. I had the surreal experience of telling my wife, as she was phoning in a take-out order, "Ask them what their current prices are. I got different numbers from their Yelp page, the menu photos posted to Yelp, their webpage, and their DoorDash page, with the highest being twice the lowest." That's some developing-country shit right there - normally you think of needing to ask a business what their day-to-day prices are as something you do in Venezuela, not in the U.S.
I'm told this is because their food suppliers have jacked up prices 80-100%, so the restaurants that don't will soon go out of business. Memo hasn't filtered down to all restaurants, though, and some are more reticent to raise their prices than others for competitive or moral reasons.
You’re sure it’s not confusion about delivery markups?
https://www.yelp.com/biz/camelot-fish-and-chips-pacifica?osq...
I'd be interested in where you think all that inflation is hiding. Because you're saying it has to be somewhere, right?
Since 2008, home prices here have gone from about $1-1.2M for a modest home in Cupertino or Los Altos to about $3.5M for that same home. Restaurant meals have gone from about $9 for an entree to about $30. Daycare is now $2000/month for an average place, or $3500/month for a good one.
This is an example of a Cantillon effect [1]. Inflation doesn't affect prices uniformly. New money enters the economy at specific points (usually the financial industry), and then it pools in firms that have strong pricing power (currently the tech industry). People close to those areas experience sharp inflation while also seeing their wealth and living standards rise sharply relative to the broader economy. People not in those areas experience the money injection as an increase in inequality, not as inflation. The money doesn't circulate effectively between the "new" and "old" economy, because the "old" economy produces little that people in the "new" economy want to buy, and when they do, there are usually ample competitors to hold down prices.
The thing is that the pandemic and now the Biden administration's policies to build back from it have in some sense broken that dam that prevents money from circulating, and so we're beginning to see more broad-based inflation. Remote work let people on Bay Area salaries work anywhere, which means you might have multiple people with $500K+ compensation bidding up home prices and spending money at restaurants in what was previously a sleepy rural area. Direct stimulus payments inject money into ordinary people's bank accounts rather than into the financial industry, so inflation resulting from them is broad-based rather than concentrated in financial assets. Infrastructure spending will shift the Cantillon effects to areas like government contractors and raw materials like steel & concrete. And policies that are specifically designed to alleviate inequality will also result in inflation: the flip side of having lots of money is that everything you spend it on costs more.
[1] https://mattstoller.substack.com/p/the-cantillon-effect-why-...
You can reduce it to 0 by shorting Bitcoin futures contracts. You can make it even more volatile if you want. You can change the multiplier on base price change i.e. volatility to be any number between -300% and 300% of its base rate(the caps depend on margin requirement), with appropriate setup.
That's for Bitcoin, but you can do other cryptocurrencies indirectly.
And these are government-regulated contracts, marked-to-market daily.
If you price asset X in crypto in the market and then buy options on USD to ensure that your sale price will be redeemable for a certain amount in USD in the future if it sells then aren't you really just pricing in USD? And then suffering a loss on your USD options if the asset doesn't end up selling?
Which I would agree with, but the original "volatile instruments cannot be used for pricing" isn't true.
> doesn't that prove that volatility does matter.
It doesn't matter for making it "possible" or even "safe in principle". It does matter if you want it to be convenient.
> aren't you really just pricing in USD?
Sort of, but you can choose to price 90% of it in USD and 10% in Bitcoin. So arguments with a discrete "impossible" seem in conflict with this continuous ratio.
The point is: If there's a maximum volatility an agent is willing to accept, one can construct a financial setup that meets the constraint. So the volatility itself shouldn't be a reason against it.
A sincere thank you for this reply.
It matters in terms of if you shift the argument from "volatile instruments cannot be used for pricing" to "volatile instruments have prohibitive costs that make using them for pricing very impractical" too, right?
Your example that you could price in bitcoin and then structure your sale offer in a way that 90% of the proceeds translate to a particular USD amount and the remainder are at risk to Bitcoin volatility is interesting to me because I think of it in terms of a Real Estate transaction. I offer my house at a price that translates to $100k USD in bitcoin and, for simplicity's sake let's say someone instantly purchases it. Now the deal is done but there is a time for all the paperwork, land title transfer, bitcoin is held in escrow, etc.. so the instant the deal is signed I buy some kind of option that ensures that the 90% of the bitcoin amount will be 90K USD when the transaction is consummated. That has a cost, right? And then if the deal falls through that cost and more is lost, right?
So those costs lower the value of my asset, so it is more than convenience is my conclusion. You agree with this, right?
However, one thing that should be mentioned is that Bitcoin is expected to increase in value. I don't mean that in a trader sense or that you should buy it; I mean Bitcoin futures are in contango(i.e. priced higher than the commodity) so you can lock in a risk-free profit by 1. Buying Bitcoin and 2. Selling a future. Specifically, the spot price is currently $47,150 while the September 2021 futures are $47,340 for a profit of $190 or about 4.8% annualized.
So currently, any financial institution would have a strong incentive to denominate any escrow accounts in Bitcoin for times of less than 4 months(there's not as much liquidity further out). I believe this is what's happening here: Regulators ask questions if banks buy the Bitcoin themselves, but if it's in escrow on behalf of your customers it's more acceptable.
Conversely, customers should prefer to pay in USD, because paying in Bitcoin is equivalent to either a short position(if they sell their Bitcoin and never buy any again) or an expected cost of 5% interest due to (directed) volatility.
So the original claim that it has "no impact at all" is probably too strong, but a 5% interest rate is not what people mean when they reference Bitcoin's wild price swings i.e. volatility: The capital appreciation/loss can be accounted for if you really want to.
Note: I'm not recommending this strategy, just attempting to calculate carrying costs in the context of a mortgage lender holding Bitcoin in escrow.
How many US mortgages are priced in gold or Yen? Even internally?
That is, everyone trading bonds/certain commercial real estate/mortgages/preferred stocks/etc. converts them to a % return, with different yields falling in different risk categories. So you might get 3% on a relatively safe commercial bond, 10% lending to Turkistan, 4% on a property in the middle of a desirable city, 13% if it's filled with asbestos and shut down by the city.
It would be possible to price a mortgage in any continuous ratio between USD/Bitcoin, though I suspect the imputed interest rates for an already-low mortgage rate would make it undesirable. Someone would just have to punch current prices into a spreadsheet to see how it affects the yield.
I would expect Bitcoin specifically to have a high interest rate holding a long position(since Bitcoin people want high leverage), and the short position to have an implied positive yield. So banks should want to price in Bitcoin since they like leveraged low-risk low profit. But I haven't looked at a price chart for that assumption.
Because if you borrowed in crypto for a house and then the price of crypto skyrocketed you would be screwed. Seems like a nice option for people trying to short the crypto market, but I doubt this has much viability.
Companies realize they can get a headline by adding crypto as a payment method, but nobody cares anymore. It’s the equivalent of a brick and mortar store accepting Venmo and then gathering everyone in the town to tell them how innovative they are…
During the great bubble, borrowers in Eastern Europe got mortgages in Swiss francs. When the market collapsed and the exchange rate sank, they were completely fucked. Don’t borrow in currency you can’t easily get your hands on.
For example, if i expect 1 bitcoin 10 years from now, I sell a future contract promising to sell 1 bitcoin at $45,000. If the price falls 5,000 over 10 years, the value of my contract is now worth $5,000 plus the 40,000 value of the coin. If I am on the opposite side and have to pay in bitcoin, I can buy a futures contract for 1 bitcoin at 45,000. If the price of bitcoin rises I am offset by the value of the futures cotnract and if the price falls the negative value of the futures contract locks my price at ~45,000.
The cost here is the premium of the futures contracts, which of course could make it more expensive to operate a crypto mortgage in the long run.
I very much doubt they'll hedge with futures - I'd assume they just sell the crypto as soon as they have it. They might put on a position in a future for the short period of time between agreeing on a price and getting paid.
And of course the house will be denominated in USD. So, bottom line, not much more than a marketing gimmick.
ETA: And perpetual futures are basically just spot, with financing baked into a funding rate (which is positive or negative depending on demand, but unpredictable ex ante, and as such does not solve your problem).
Agreed it is a gimmick, I would imagine everything will be in fiat except at the time of each payment, when the instantaneous crypto value will be credited.
That's already too much risk for 10 years out. The chance of etherium having died in the PoS transition, or the chance of any given market-related contract having an exploit that renders it worthless, are both simply too high to actually participate in for a 30 year loan.
Do you have a reference to a place where I could get one of these futures to get a good feel for how much extra it would cost to secure a loan against that volatility?
Presumably a large mortgage lender would write their own contracts or collaborate with an exchange for a product using their own mortgage contracts instead of USD on margin as collateral for the loan.
I have no idea who that person would be.
I can't imagine they're going to go through the effort and risk of effectively hedging their crypto risk through securities markets, which would come at a premium.
If not, there would likely be some who see this as a vehicle to clean up some holdings, depending on provenance.
https://legal.thomsonreuters.com/en/insights/articles/u-s-re...
That's not entirely true. The bank wants to know enough information to make sure that the cash came from the buyer, and not from someone else other than the buyer, for AML reasons as well as creditworthiness. So they do seek proof of the provenance of the cash sufficient to demonstrate that it actually came from the buyer.
(Source: detailed conversations with bankers when buying a home.)
https://www.washingtonpost.com/archive/realestate/1989/05/06...
(family member is a mortgage underwriter)
The shock didn‘t come more than a year after and it was mostly the last ones to buy in to get burned.
This time, it‘s worse. In the 90‘s, it was all real stock, and it was getting visible when the companies started to underperform. There were a few physical assets to sell.
This time, it‘s much worse and the crypto boys will only find out that the only real value their bytes have is whatever anyone else is willing to pay for it.
I‘m not worried about crypto being here to stay. That won‘t happen. I‘m worried about what it will take with it when it vaporizes in front of the bulls.
Can you elaborate? You think all cryptocurrencies will disappear / drop to $0.00?
I'm sure there'll be more massive market crashes to come, but you're saying one day every cryptocurrency will suddenly just be done and gone and that's it and no one's using, buying, or selling any cryptocurrencies again after that point?
Politicians are as gullible as the public when it comes to quick money.
Some organizations today which are scams are allowed to live due to certain freedoms, does not prove the contrary - ex: Scientology, MLMs, etc.
HN/SV's idea for disruption of money transfer is something like Venmo, where you can send money from one person in US to another person in US through an app.
Cryptocurrency's idea for disruption of money transfer is that you sign a transaction and broadcast it, and it works anywhere in the world without discriminating on nationality, and without any counterparty or intermediary.
Borrowers want to pay with crypto. Originators add a new FX-esque transactional revenue stream. Seems like a classic win-win.
Instant payments have been available through the world for ages, SEPA for instance and soon RTP in the US but that value doesn’t accrue to the underlying currency. That makes the service valuable not the medium.
Not to mention square cash and Venmo. The value is captured in the equity of the companies not in dollars. Now you could tell me solana is both like paying someone in square shares via square cash but now you’ve got a security on your hands and about 1000 more problems.
You’re right, even though it’s still faster for me. But the whole point of allowing payments in crypto is removing steps from that process. Which is valuable.
> The value is captured in the equity of the companies not in dollars.
I do not care about companies. If it helps people I’m for it.
I suspect you completely missed my point.
Plus, I've been battling with Venmo's customer support for days now because my new phone number apparently was used before to activate an account and they need to see my phone bill to release it.
Sorry, I just really hate Venmo right now.
If there's a single app that lets me use Venmo and Paypal and Cashapp all at the same time, I'd love to know about it.
Fast, reliable transfers are valuable, but hardly a property of crypto alone.
Haha yeah I specified SOL for that reason. I don’t envy anyone moving BTC and ETH around but I suppose the beauty is in choice. I can’t Zelle you USD overseas but I can send crypto just as fast.
YoY metrics such as total number of users, total number of on chain txns, total number of exchanges and companies are all increasing. No conversation on HN is going to change the fact that an ever growing population of people and companies DO see value in crypto. So maybe ask yourself why it's only getting stronger if there's zero value to be found in this industry.
I wonder why people don't think holding 100% bytes is either.
It may remain in use in less, or in-regulated markets, but that will be a secondary thing. Eg what if it is not exchangeable to any major currency?
Basis gets set at time of payment, so borrower would still have to pay capital gains on the appreciated value, right?
Buying property with ill-gotten gains is an extremely common method of money laundering. Having a large hoard of cryptocurrency that you prefer not to liquidate screams "I'm trying to pretend that this isn't a taxable event."
We don't let people pay their mortgages with pre-tax stock gains, why the fuck are we bending over backwards to let people pay their mortgage with cryptocurrency?
This doesn't make it any easier to evade taxes than it would if you paid with cash. The IRS can subpoena your payments and tax the value of the crypto at time of transaction. If you don't report the sale (payment) of the asset on your taxes, there will be a mismatch that is easily traceable.
This is just the real estate industry adding artificial value by catering to the crypto market.
People worked up that this would enable money laundering seem blissfully unaware how easy it already was to begin with.
It's so strange to me that Hacker News of all places has a very vocal anti-crypto, anti-decentralization crowd whenever any news like this comes out. In other threads they're unironically complaining about "big tech censorship" or the increasing control banks have over one's life!
I can't prove it, but it seems like too much foreign capital that is buying our land is ill gotten, and allowing crypto is just going to make it worse.
I believe we are the Only country that allows foreigners buy property with a phone call, or email.
[0] https://www.latimes.com/archives/la-xpm-1992-02-21-mn-2588-s...
It’d be much easier to just pay my mortgage in crypto, then the endless back and forth that happens to get a bank to take crypto proceeds. (Count yourself lucky if they don’t shut down your entire account!) Crypto users are much like sex workers in this regard.
When my crypto startup launched, it was nearly impossible to find a bank to give us a checking account. We were literally walking around with a VC check and nowhere to cash it. Just because we had the words “cryptocurrency” in our charter. 99% of the banking system hates crypto. This is a smart move to deliver value to an underserved, now very wealthy, customer segment.
The current top comment says "cryptocurrency continues to occupy more and more ground in the financial world. Cryptocurrency continues to expand and grow by every conceivable metric".
It feels like cryptocurrency advocates flip freely between positioning crypto as embraced by the mainstream financial system, or as a foil to the that system, whatever serves their purpose.
This isn't a personal indictment, it's just an observation reading the comments, especially since I shockingly "remain skeptical" per that same top comment.
It's the same as if I were to convert the bitcoin to dollars on my own and pay via dollars. Taxes are still paid in this scenario just as they would be if I converted the bitcoin to dollars and did whatever else with it...
Why so angry about this?
The whole train of thought is weird though. There are plenty of people who pay all of their taxes on everything, but still deal in largely cash.
Then, in the remote chance the business gets convicted later up the road, it will give up 1% of it's quarterly operating profit as a fine.
I mean, duh, that's how US finance operates. </s>
I used a major crypto exchange to sell and convert my holdings into USD, but frustratingly they did not provide adequate documentation to show how the funds were contributed and transferred. I needed to email the exchange's support team, escalate multiple times, and finally they sent me a series of screenshots. The delay almost caused my offer to fall through.
This would have been much easier if I could have transferred crypto directly to the mortgage company.
ETA: according to comments further down, selling your crypto is taxable, whether you get dollar for it or a house. Which makes sense, of course.
Because crypto payments are niche and likely come with more hassle (e.g. volatile value, lender needs dollars and has to take on any risk with liquidating bitcoin/other cryptocurrencies). You might as well ask why US mortgage lenders don't accept payments in RMB or Euros.
Exactly.
>> It's an additional source of revenue for them.
Not all revenue is good though. If I spend $1,000,000 to get $5,000 in extra revenue, it would be a pretty bad business decision. A lot of crypto is hype, and I'm not sure there's much actual real revenue in supporting it for anything besides speculation.
"Yes, we would be delighted for you to settle a debt at 3% per with an asset- volatile, tis true- that is nevertheless likely to grow 20%-100% per over the next several years."
Cheapest, easiest, balance sheet diversification play ever.