I’ve been considering a new mechanism for funding mortgages, and potentially other forms of debt, which is effectively individuals self-issuing bonds.
I’m wondering if there would be demand for mortgage debt in the form of crypto bonds that are legally secured to a property?
Would you be interested in crypto-bonds that would:
- be legally secured to the property being bought
- be a highly stable store of value
- predictably generate interest
- easily be sold or bought on exchanges
- be person to person with no platform in between (hopefully unaffected by regulators)
- enable savers to get better interest rates than saving accounts (depending on market)
- enable borrowers to borrow more cheaply than through traditional lenders (depending on market)
- reduce dependence on the lending institutions who helped cause the financial crisis in 2008
In principle, if trust & legal enforceability could be established, do you think people would be interested in buying, holding, and trading this type of asset as part of their crypto portfolio?
There would certainly be challenges in achieving this, which I think can be overcome, but there’s little point working on it unless there’s a good chance of demand for the assets.
What do people think?
- Would you be interested in stable value, interest bearing crypto-assets?
- Do you like the idea of peer-to-peer mortgage borrowing without banks or middlemen?
- Do you like the idea of directly holding high-quality mortgage debt?
- Have others tried this or discussed it elsewhere?
I’d love to hear people's thoughts.
DavidMc0 - This post is quite old now, I don't know who will still be following it, - Have you put any more research into this? I am relatively new to crypto-currencies but know the basics enough to tie the Australian legals to a smart-contract. I am a property investor/deal-maker in Australia. My partner and I work for the DG institute, founded by a reputable barrister in Sydney.
We are currently raising our own mortgage for a off-grid sustainable eco-development in Margaret River Western Australia - 'Ecopodz'.
Australia's property boom has been fuelled by large investment from the Asian-pacific region, where I hear they banks are creating problems for cryptocurrency holders/investors. We thought a mortgage in a Western country with strong legal framework would be a safe haven for crypto-investors without "cashing out" so to speak.
If a crypto-investor invested in a mortgage it would come with a fixed interest rate - in our case 10%. Once the mortgage was tied to the smart-contract it could be broken down into minimal "tokens or coins" and traded and a "mortgage or property backed token or investment" - maybe a $1 value. Yes it would be somewhat 'pegged' to the underlying currency because the mortgage would need to be paid in the base currency (AUD), but this it not a speculative investment. It would be considered a "blue chip" asset. If someone was to default on their mortgage, the holder of the tokens can employ a local lawyer and repossess the property - exactly the same procedure as the banks. If this were to happen there would be costs involved which would come out of the owners equity - hence why banks normally only lend to 80% of the properties value.
The attraction for a crypto-investor would be that they could trade this token (part of the mortgage) and it would represent a fixed $ value with interest. It is backed by a tangible asset (land) and supported by strong Australian legal framework. This would save the investor having to cash back through traditional banks into fiat currency which is becoming a problem for some people, especially in Asia and I believe some parts of India and eastern Europe?
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