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It\u2019s a big first for cryptocurrency and real estate. The nation\u2019s second largest lender says it successfully accepted mortgage payments, in crypto, from a handful of borrowers. It was part of a pilot program by United Wholesale Mortgage that was successful, but is now being put back on the shelf, for a later date.

Hi, I'm Kathy Fettke and this is Real Estate News for Investors. If you like our podcast, please subscribe and leave us a review.

UWM announced the good news this last week. It says that it \u201csuccessfully evaluated and accepted the first-ever cryptocurrency mortgage payment in September and five more\u2026 in October.\u201d (1) It was the first time that any U.S. lender has accepted cryptocurrency as a home loan payment.

UWM CEO Mat Ishbia said in the announcement: \u201cAs we said last quarter, we were going to look into accepting cryptocurrency and test it to see if it\u2019s a faster, easier and cheaper solution and thanks to our innovative technology team members, the transactions were successful.\u201d But he also said that: \u201cDue to the current combination of incremental costs and regulatory uncertainty in the Crypto space, we\u2019ve concluded we aren\u2019t going to extend beyond a pilot at this time.\u201d

Test-and-Learn Process

As it turns out, the program was more of a \u201ctest-and-learn\u201d process in preparation for crypto\u2019s future use. UWM says it would resume the use of cryptocurrency and blockchain technology once it becomes something that will \u201cpropel the organization forward.\u201d

The program allowed for the use of three kinds of crypto including Bitcoin, Ether, and Dogecoin. Ishbia told CNBC that borrowers \u201cliked\u201d the idea and thought it was \u201ccool\u201d but ultimately, the program only attracted six people. Ishbia says: \u201cThere was not enough demand at the end of the day to really push the envelope too hard.\u201d (2)

Investment Tool vs. Currency

As CNBC reports, the experiment provides proof that many people view crypto as an investment tool, and not a currency to buy things. At least not yet. Most cryptocurrency users hold on to their virtual coins, hoping for an astronomical return, as some early investors have seen. CNBC calls it the HODL mindset which stands for \u201chold on for dear life.\u201d

According to Coinbase, just one Bitcoin is worth more than $60,000. It was first introduced in 2009, but in the last five years, it has gained about 8,600%. Market cap is $1.2 trillion.

Ethereum or Ether has also done well. Current price is about $3,800 per coin with a market cap of more than $480 billion. Over five years, that coin has gained about 27,000% in value.

Dogecoin began as a joke and became wildly popular when Elon Musk promoted it in a tweet. It\u2019s now worth only about $.25 cents per coin, but that also represents more than 100,000% growth. Market cap for Dogecoin is more than $26 billion.

Using Crypto Creates Taxable Event

So there\u2019s money on the table for some investors if they want to \u201ccash in.\u201d One problem with doing that however, is that using crypto will create a taxable event. CNBC says the IRS views crypto as property, and the six homeowners who just paid UWM in crypto will likely face a big tax bill.

A CoinTracker CPA told CNBC: \u201cThe one thing that a lot of people don\u2019t realize is that whenever you spend cryptocurrencies to buy a cup of coffee, or any type of consumer item, that triggers a capital gains event.\u201d

As for UWM\u2019s future plans, Ishbia says the lender will be able to turn the program back on when the demand is there. He says: \u201cWe know how to do it now.\u201d

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Thanks for listening. I'm Kathy Fettke.

Links:

1 -https://www.uwm.com/about-us/media-resources/press-releases/2021/october-14-2021

2 -https://www.cnbc.com/2021/10/14/united-wholesale-mortgage-ditches-its-plan-to-accept-bitcoin-ethereum.html