Crypto rules for mortgages must reflect self-custody reality

Key Points

1. The FHFA's directive risks excluding self-custodied crypto assets by focusing only on US-regulated exchanges, which contradicts the system's decentralized nature.

2. Self-custody is a core feature of crypto, offering security advantages over centralized exchanges, as evidenced by past collapses of major custodians.

3. Policymakers should adopt a framework that includes self-custodied assets in mortgage underwriting, using verifiable methods without relying on third parties.

4. Any regulatory approach must balance innovation with risk management, avoiding outdated models that force crypto into traditional financial frameworks.

5. Understanding decentralization and self-custody is crucial for regulators to create effective policies that support both security and innovation in crypto.