For all the enthusiasm cryptocurrency owners have for the controversial alternate financial system, many are reluctant to cash in for fear of missing out on future appreciation. A Miami startup says it has found a way to use the asset without sacrificing that potential gain and without tax ramifications.
Milo.io holds Bitcoin equal to the home loan's value in third-party custodian accounts with Coinbase or BitGo. When a loan is paid off, the client gets the currency back regardless of how much its value may have changed. Crypto is a highly volatile asset, with Bitcoin selling for about $40,000 when Milo issued its first mortgage in 2022. It fell as low as $15,000 and peaked last fall at $123,000 before falling below $68,000 in recent months.
When values drop too far, borrowers may be asked to transfer more coins to the collateral account.
More than 100,000 people in the United States are holding at least $1 million in Bitcoin in digital wallets, says Milo.io founder Josip Rupena. But many have difficulty qualifying for mortgages and other loans because they may not have consistent employment, or their incomes don't qualify for a $1-million home mortgage.
Rupena, 41, grew up in Aventura and earned a finance degree from the University of Miami. He started in traditional banking and asset management, working with Goldman Sachs and Morgan Stanley. He started buying Bitcoin in 2017 and became interested in lending and cryptocurrency but didn't see anyone finding a way to make both ends meet.
Borrowers pay a higher interest rate but still should come out way ahead, he says. Milo offers 100% financing, so borrowers don't need a traditional 20% down payment — he calls it "dead money." And there's no capital gains exposure because they never cash out the cryptocurrency.
"The math just looks entirely different," Rupena says.
For Milo.io, the mortgages are double-collateralized. If there's a default, Milo can keep the Bitcoin or other cryptocurrency, and it has a lien on the property. So far, Milo hasn't even seen a late payment on more than $100 million in loans, he says. The average loan is about $1 million to $1.5 million with borrowers throughout the country.
Last summer, the Federal Housing Finance Agency ordered government-backed mortgage giants Fannie Mae and Freddie Mac to develop policies allowing cryptocurrency to be considered in loan risk assessments. But that hasn't happened yet, and such a policy likely would require liquidating some of the assets. That's a non-starter for Bitcoin owners, Rupena says, because they've developed "an emotional attachment" and "will do anything to not lose it."
Milo partnered with developers of a new Wynwood condominium, The Rider Residences, to offer loans to hold units and then convert them to traditional mortgages when the 146-unit, 12-story building opens in fall 2027. "They were trying to get in front of an audience that had Bitcoin," Rupena says. — By Michael Fechter