The Federal Housing Finance Agency (FHFA) has issued guidance permitting the inclusion of self-custodied cryptocurrency assets in mortgage risk assessments when verifiable through transparent, auditable methods. This directive prioritizes proof-of-ownership validation over custody models, addressing counterparty vulnerability concerns highlighted by centralized exchange failures.
The framework specifically tailors crypto mortgage risk protocols around three pillars: verifiable documentation of assets via onchain tools, liquidity evaluations, and risk mitigation safeguards. Proposed measures include applying valuation haircuts to digital assets and implementing tiered lending limits to manage volatility exposure.
The FHFA emphasizes reduced counterparty risk with self-custodied assets compared to exchange-held holdings. Financial institutions must however develop technical expertise to authenticate blockchain-based asset proof, as education is deemed critical for both regulatory compliance and operational implementation.
This initiative marks a modernization step for housing finance infrastructure, potentially integrating decentralized asset holdings into mainstream lending. Successful adoption requires ongoing industry collaboration and lender education for effective deployment of verification standards.