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Asset-Backed Cryptocurrency Reinventing the Future of Real Estate

CHRIS GRIMES

Cryptocurrency and Real Estate

Since the inception of Cryptocurrency—Bitcoin, in 2009, the crypto market has experienced tremendous growth and innovation, thanks to the proliferation in investment.

 

However, there are still notable concerns with first-generation cryptos that make investors skeptical. That’s because of their unpredictability, volatility, and cybersecurity issues.

 

These drawbacks have formed a solid ground for asset-backed cryptocurrencies to thrive. This new development has particularly impacted the real estate industry, projected to hit a whopping USD 8,662.2 million by 2026.

 

What Are Asset-Backed Cryptocurrencies in Real Estate?

Asset-backed cryptocurrencies involve digitizing tangible assets through a process commonly known as tokenization. These assets could either be real estate property, gold, or fiat currencies. 

 

In real estate tokenization, a physical asset is first converted into digital security tokens using specially designed blockchain platforms. Investors can then buy these tokens, hence becoming partial owners of the real estate property. And just like other shares, investors can trade off the tokens at their convenience.

 

Advantages of Asset-Backed Cryptocurrency in Real Estate

Enhanced Stability in the Crypto Market

Price stability is perhaps the main drawback in the crypto market. The indeterminable price swing of crypto coins scares away many prospective investors, which has continued to hurt the industry. 

 

On the flipside, asset-backed cryptos are based on actual real estate property whose price volatility is very bearable. Again, how the price swings entirely depends on the value of the underpinned property or properties. 

 

Investors can also sell their tokens if the property value scales higher than the token values. That helps them monitor the market and take the necessary actions to mitigate significant losses. 

 

Possible Mass Adoption by the Public

Despite the significant milestones that the crypto industry has hit so far, we cannot ignore the percentage of the public that still questions its credibility. And this can largely be attributed to the fact that first-generation cryptos are intangible. 

 

Asset-backed cryptos hinged on real-world assets help eliminate the doubt my turning an invisible currency into something almost tangible and relatable. The fact that these tokens also have an intrinsic value instead of their first-generation counterparts speaks volumes to the public. 

 

That has continued to create an easy ground for onboarding even more investors into the world of real estate using cryptocurrency.

 

Creating a Conducive Environment for Small Investors

One of the significant barriers to entry into real estate investment has been the growing property costs. The pandemic only exacerbated the issue with housing prices skyrocketing by more than 9.4% across OECD countries. And that’s mainly just residential real estate, where most assets cost a few hundred thousand dollars, where commercial properties cost millions of dollars. 

 

The opportunity of asset-backed cryptocurrency is that—these multimillion-dollar assets are subdivided into affordable tokens sold individually. For instance, a small investor with $1000 can jump into a $10 million real estate property by purchasing 0.0001 shares. 

 

Bridging this gap goes a long way in accommodating more investors—a problem that has been crippling the crypto market for the longest time.

 

Asset Tokenization Favors Any Property in Real Estate

Ideally, any asset that has monetary value can be tokenized. That means it’s possible to absorb all real estate property from residential and industrial to raw land and commercial property into the crypto market for trade. This feature of asset-backed cryptos continues to pump billions of dollars into the crypto market every day.

 

Blockchain Guarantees More Trust and Heightened Security

The blockchain platforms are designed to keep track of all transactions on the tokens. When a transaction occurs, the system notifies all associated stakeholders. That allows investors to monitor the dynamic token pricing and history to make informed decisions when trading. Note that blockchain borrows a lot from Distributed Ledger Technology (DLT). That means no individual party can manipulate the already existing policies. DLT technology uses cutting-edge encryption technologies that create an elevated barrier to prevent possible intrusions, giving real estate investors more confidence.

 

Adoption of Smart Contracts

There truly had to be a better way of transferring real estate ownership, enter smart contracts and tokenization. 

In the past, property owners were afraid of giving out their property before receiving funds, while buyers were hesitant to send their funds before acquiring the property. The good news is smart contracts have created a middle ground where the entire process is automated and can be structured to simultaneously enact the transfer of funds.  

 

Real Estate Toronto


Who Does It Relate to in the Mortgage Industry?

Real Estate Investors

As we have just pointed out, there are many setbacks that have been hindering potential investors from breaking into cryptocurrency. 

Reducing volatility of the crypto market, bringing tangible assets into the picture, and maximizing security have streamlined the path for most potential investors. The concept of tokenization has also created space for capital-restrained investors to start small. 

 

Mortgage Lenders, Underwriters, and Borrowers

As more investors join the crypto and real estate markets, it is evident that demand for extra funding will increase. And that translates to a potentially extensive market for mortgage lenders while providing enough capital for borrowers to invest entirely in crypto either with Fiat currency or ideally with the equity in their property. 

 

Without automated systems, lenders and underwriters will spend hours analyzing and performing due diligence on each borrower and, more importantly, properties before lending money or tokenizing assets. However, with advancements in auto-adjudication, open banking and access to more data, this time-consuming process is being widdled down to minutes. This technology coupled with smart contracts and asset-backed crypto will allow purchases, refinances and crystallization of equity to transpire instantly --- or at least as fast as the blockchain can move. 

 

Scaling Higher With Asset-Backed Crypto and FundMore.AI as a Mortgage Lender

Whether you have a solid understanding of where the crypto industry is headed or how asset-backed crypto is revolutionizing the real estate industry there is so many opportunities ahead as we begin to unravel the full power of blockchain. 

 

If you are a mortgage lender or underwriter, it doesn’t end there. There’s so much more you can achieve by combining asset-backed crypto with FundMore.ai technologies. 

 

As more and more investors apply for funding, you’re definitely going to need automated LOS that instantly provides credit decisions to your borrowers. That will help streamline the lending process so you can close more deals over a shorter period. 

 

And guess what? That’s exactly what Fundmore.ai was designed for.

Book an appointment with us today, and our team will guide you on how to get started. 

Tags: mortgages, Mortgage processing, finance, cryptocurrency, real estate, future of real estate