Crypto Mortgage Rules Must Embrace Self-Custody

Crypto Mortgage, The Federal Housing Finance Agency (FHFA) is finally exploring how cryptocurrency could factor into single-family mortgage risk assessments. This long-overdue move could let long-term crypto holders use their assets to qualify for mortgages without liquidating their portfolios.

But if these rules are to work, they must reflect how crypto actually operates — including the critical role of self-custody.

Misinterpreting the FHFA’s Guidance

Some have mistakenly read the FHFA directive as requiring crypto to be held only on U.S.-regulated exchanges in order to qualify. That’s a serious misinterpretation.

The FHFA states digital assets must be “capable of being evidenced and stored” on such exchanges. This language doesn’t demand exchange custody — it simply emphasizes that the assets must be verifiable and compatible with regulatory standards.

Verification, not custody model, should be the standard.

Why Self-Custody Is Secure — and Essential

Self-custody isn’t a fringe practice. It’s a core principle of blockchain technology and user empowerment.

Compared to centralized exchanges, self-custody — when properly managed — can be more secure, transparent, and resilient. Major exchange failures have shown the risks of trusting third-party custodians. By contrast, on-chain records in self-custodied wallets prove balance and ownership without introducing counterparty risk.

Third-party tools already exist to verify wallet holdings and track transaction histories. Excluding these verifiable assets simply because they aren’t exchange-custodied could encourage less secure behaviors and punish those who follow best practices in crypto asset management.

A Smarter, Balanced Framework

To be effective and fair, any crypto-inclusive mortgage framework should:

Accept both custodial and self-custodied assets if they’re verifiable and liquid.
Apply valuation discounts (haircuts) to account for market volatility.
Cap crypto’s share of total reserves using a tiered, risk-based system.
Require clear documentation of pricing and verification methods, regardless of custody type.

This mirrors how mortgage underwriters treat other volatile assets — like stocks, private shares, or foreign currencies. There’s no reason crypto should be treated differently.

Avoid Forcing Crypto Into Old Models

The FHFA has a real opportunity to modernize housing finance. But that will require rejecting outdated assumptions that force crypto to conform to legacy systems.

We don’t need to dilute decentralization to make it fit. We need tools and standards that verify it on its own terms.

Too many policies — from tax treatment to securities law — assume all users rely on centralized intermediaries. But millions of crypto participants prefer self-custody and decentralized protocols because they value autonomy, transparency, and security.

At the same time, others choose centralized platforms for convenience or regulatory clarity. Both paths are valid. Any successful regulation must respect this diversity of choice.

Bridging the Policy Gap

To close this policy gap, regulators need deeper technical understanding of decentralization. That includes:

How self-custody works
Why it enhances user control and system resilience
What tools already exist to verify ownership without third-party intermediaries

Without this knowledge, future crypto policies risk being out of touch — repeating the same blind spots that have plagued prior regulatory efforts.

Final Thought: The future of finance is decentralized and diverse. If mortgage policies want to include crypto fairly, they must evolve to accommodate both centralized and self-sovereign asset holders.