American home buyers are obviously not interested in using cryptocurrencies such as Bitcoin to pay for mortgages.
United Wholesale Mortgage made its public debut through a special purpose acquisition (SPAC) merger in January, and began piloting crypto payments for the first time in the industry in August. But CEO Mat Ishbia now tells CNBC that after testing, the company believes it is not worth it.
“Due to the current combination of incremental costs in the encryption sector and regulatory uncertainty, we have concluded that we will not go beyond the scope of the pilot at this time,” Ishbiah said.
The Michigan-based mortgage company tried three different types of cryptocurrencies—Bitcoin, Ethereum, and Dogecoin—and multiple different borrowers to understand how the process would work. UWM successfully accepted its first ever cryptocurrency mortgage payment in September, and successfully accepted five in October.
But in the end, the demand does not exist. Ishbia told CNBC that borrowers “like it” and “say it’s cool”, but the option to trade in cryptocurrency is “not a driving factor.”
“There is not enough demand at the end of the day to really push the limit,” he said.
This is the latest evidence that many cryptocurrency users see it as an investment rather than a substitute for money. Although the price of cryptocurrency has risen in the last year, it is still rarely used to buy and sell physical objects. On the contrary, most investors insist on the “HODL” (Hold to the value of life) mentality, they buy and hold their virtual coins, hoping that they will appreciate. Last year, it was a good bet-the value of Bitcoin was more than five times what it was a year ago, while the value of Ethereum has risen more than ten times.
Treasury Secretary Janet Yellen and US Securities and Exchange Commission Chairman Gary Gensler both stated that they have no plans to impose restrictions on cryptocurrency trading. However, the proposed infrastructure bill contains new reporting requirements for cryptocurrency “brokers,” and well-known players in the field, including Coinbase and Andreessen Horowitz, have asked regulators to provide more information.
UWM is the second largest mortgage lender in the United States, second only to the Detroit lending giant Quicken under Rocket Companies-it operates entirely through wholesale channels, which means that the company hires a group of brokers, and then they connect customers with home loans .
The company itself does not hold cryptocurrency on its balance sheet. UWM converts the received tokens into legal tender during the transaction.
For the six homeowners who participated in the experiment, some people may now face tax bills for payments they made in cryptocurrency.
Since the U.S. Internal Revenue Service classifies digital currencies such as Bitcoin as property, the payment of mortgage loans in cryptocurrency is considered a taxable event.
There will always be a difference between what you pay for cryptocurrency (that is, the cost basis) and the market value at the time you spend it. In addition to other taxes that you must pay (such as sales tax), this difference also triggers income capital gains tax.
“One thing that many people don’t realize is that every time you use cryptocurrency to buy a cup of coffee or any type of consumer product, it triggers a capital gain event,” said Shehan Chandrasekera, a certified public accountant and principal. The tax strategy of CoinTracker.io, a digital currency tax software company that helps customers track their cryptocurrency across virtual wallet addresses and manage corresponding tax obligations.
If in the end enough borrowers are interested, UWM may delist the project in the future.
Ishbia told CNBC that as a cryptocurrency “Being more mainstream, we can open it any day. We now know what to do.”
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