Opinion by: Margaret Rosenfeld, Chief Legal Officer of Avestek
The Federal Housing Finance Agency (FHFA) recent instructions to find out how cryptocurrency can be included in single-family mortgage risk assessment, this is a welcome and long step.
If applied, it can allow crypto holders to use their digital assets for a long time, when they can be forced to qualify for the mortgage.
To realize its ability, the resulting proposals indicate how Crypto actually works. And this means recognizing the legitimacy of self-casal digital assets.
Misunderstand fhfa instructions
Some have already misunderstood the instructions required of crypto on the US-controlled exchange to count Crypto. This would be a serious mistake – and contrary to the plain text of the instruction.
“Digital assets … should be able to be subjected and stored for all applied laws to be subjected and stored.”
The phrase is clear “capable of being stored”. The property is safely handled to verify and safely handle through the US-regulated infrastructure, not to restore assets held anywhere else. There should be a standard of verification, not a specific custody model.
Safety case for self-cosmetry
Crypto does not have a self-custody a fringe activity. It is the foundation of architecture and security of the system. Compared to centralized exchanges, well-managed self-custody can provide better transparency, auditability, and safety. The collapse of major patrons and centralized exchanges has shown how the actual opposition may have a risk.
Appropriately documented, self-colored assets can be completely audible, as onchain records reflect balance and ownership. They also provide high levels of protection, as cold storage and non-custodial purse reduce single points of failure. In addition, self-colored assets are verified, third-party equipment is already available for wallet holdings and transactions history.
If the policy makers exclude these assets from hostage underwriting only because they are not exchange-custoded, they risk to encourage less safe practices and punish users to correct the crypto.
A structure that supports innovation
There is a better way. Any sound crypto mortgage structure should allow both self-custoded and custodial holdings, provided that they meet the standards of verification and liquidity. It should also apply appropriate assessment discount (haircut) for instability.
Another major requirement is limiting the part of the total store’s crypto using a standard risk-based tier approach.
Connected: American regulator ordered Fedi Mae, Freddy Mac to consider Crypto for hostage
Finally, it should make clear documents of verification and pricing methods compulsory regardless of detention type. This thinking already applies to unstable assets such as stocks, foreign currencies and even private stocks. Crypto should not be considered differently.
Do not force crypto in older models
This instruction has the ability to modernize housing finance for the digital age. However, to understand this, the traditional model should avoid the trap of forcing crypto to mimic.
We do not need to level decentralization to fit old -risk boxes. We need smart ways to verify it. Let’s get this right, not only for crypto holders, but also for the integrity of the mortgage system.
This is only one example of a major challenge facing the new crypto policy. From tax reporting to securities classification, a lot of rules are drafted, which all users rely on centralized intermediaries. Millions of participants select self-custody or decentralized platforms as they give importance to transparency, autonomy, lack of traditional mediators and safety. Other people prefer regulated patrons who provide centralization.
Both models are valid, and any effective regulatory structure must identify that users will continue to demand various options.
To bridge this difference, more technical education about decentralized technology is necessary. Policy makers and regulators require a deep understanding of how decentralization works, why self-cosmetics matters and what equipment exist to verify ownership without relying on third parties.
Without this foundation, the future instructions, statements, regulations and law risk repeat the same mistake, ignoring large segments of the ecosystem and fails to be responsible for the entire range of participants in the Crypto industry.
Opinion by: Margaret Rosenfeld, Chief Legal Officer of Erestec.
This article is for general information purposes and is not intention and should not be taken as legal or investment advice. The ideas, ideas and opinions expressed here are alone of the author and not necessarily reflected or represented the ideas and ideas of the components.
