Cryptocurrency and Fungible Tokens in Real Estate

The United States government’s stance on using cryptocurrency in home purchases is primarily focused on regulation, taxation, and establishing guidelines for its use as an asset.

Here are the key points based on recent government actions and statements:

• • IRS Classification and Taxation: The Internal Revenue Service (IRS) treats cryptocurrency as property for federal income tax purposes, not currency. This means that using crypto to buy a home (or any good/service) is generally treated as a taxable event—a sale or exchange of property—which can result in a capital gain or loss that must be reported.  IRS  , Reuters
• Mortgage Qualification (Fannie Mae and Freddie Mac):
  • The Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac (two major government-sponsored enterprises in the mortgage market), has directed them to consider a homebuyer’s cryptocurrency holdings as an asset when assessing mortgage risk.  Investopedia
  • This move encourages lenders to recognize crypto assets, provided they can be evidenced and stored on a U.S.-regulated centralized exchange and subject to all applicable laws. AP
  • Previously, crypto assets often had to be liquidated to U.S. dollars and seasoned in a bank account for a period before they could be considered as reserves or for a down payment. The new guidance is aimed at modernizing this approach.  NJ Lenders Corp
• Information Reporting: The government is working to establish regulations for real estate reporting persons (like brokers and settlement agents) to report on real estate purchasers who use digital assets to acquire property, ensuring compliance with tax laws. Regulations
• Direct Payment: While the government does not prohibit the act of using crypto for a home purchase, most transactions still involve converting the cryptocurrency to U.S. dollars (fiat currency) at some stage due to:  RealOpen
  • The seller’s preference for dollars.
  • The requirements of traditional title, escrow, and mortgage companies, which operate primarily in fiat currency. StoneOak

In summary, the government is moving toward a framework that acknowledges and regulates the use of crypto assets in the home-buying process, particularly as part of a borrower’s overall financial health for mortgage qualification, but it maintains strict tax reporting requirements for the use.