Introduction
In a groundbreaking move for the real estate market in Australia, Block Earner, a fintech company located in Sydney, is introducing a unique financial product that facilitates home purchases using Bitcoin as collateral. This new offering allows Australians to obtain home loans backed by their cryptocurrency without the necessity of liquidating their Bitcoin holdings.
Bitcoin-Backed Mortgages
By providing what it pronounces as the nation’s inaugural Bitcoin-backed mortgage, Block Earner enables borrowers to secure up to half of a property’s value through a deposit loan based on their Bitcoin, which will be held securely by the digital asset management firm, Fireblocks.
The innovative loan structure permits borrowers to make their repayments in either traditional cash or cryptocurrency, granting flexibility, and includes an advantageous early exit option without penalty. Charlie Karaboga, CEO and co-founder of Block Earner, emphasized in a recent statement the importance of this product:
“Crypto holders shouldn’t be forced to choose between retaining their Bitcoin assets and purchasing a house.”
He highlighted the potential of this service as a significant advancement in the realm of cryptocurrency and property transactions, referring to it as a “turning point” for financing in the digital asset space.
Loan Process and Structure
The process is fairly uncomplicated: customers deposit their Bitcoin with a custodian, borrow up to 50% of the home’s value, and then complete the purchase with a conventional lender. This loan comes with an interest-only period lasting up to four years, allowing clients to sustain their exposure to Bitcoin’s market fluctuations without the tax consequences associated with selling their assets.
Managing Volatility
Addressing concerns regarding the volatility of Bitcoin, Karaboga explained that the loan operates on a strict loan-to-value (LTV) ratio capped at 60%. If Bitcoin’s value significantly declines, borrowers receive a 30-day notification period to rectify their LTV through additional fiat payments, collateral adjustments, or topping up with more Bitcoin. This system is designed to safeguard the borrower’s home investment during moments of market instability, ensuring minimal risk of liquidation. According to Karaboga:
“Within this 30-day timeframe, either the customer can address the LTV, or we resort to liquidating only a portion of Bitcoin to stabilize it, ensuring the home remains secure from potential losses due to price drops.”
Market Response and Future Outlook
Block Earner reports that during its trial phase, it has attracted over AUD 110 million (approximately USD 72.4 million) in prospective borrower interest, signifying strong demand for this innovative financial solution. This approach mirrors trends seen internationally, as housing regulators in the United States contemplate the feasibility of incorporating cryptocurrency into mortgage qualifications.
Furthermore, Block Earner posits that individuals who have consistently held Bitcoin or gold now possess heightened purchasing capabilities, particularly as real estate prices continue to rise in Australian dollars. Notably, the company highlights that the average home price in Australia measured in Bitcoin has decreased dramatically from 627 BTC in 2016 to just 4.3 BTC as of 2024.
Block Earner asserts that if Bitcoin’s appreciation outstrips inflation rates while property values merely align with them, leveraging crypto in real estate transactions is not only possible but strategically advantageous, forming part of a broader integration of digital assets into the mainstream economy.
