FHFA Directive May Allow Crypto for Mortgages, Rosenfeld Says

Margaret Rosenfeld, the chief legal officer of Everstake, has welcomed the Federal Housing Finance Agency’s (FHFA) recent directive to explore the inclusion of cryptocurrency in single-family mortgage risk assessments. This move, if implemented, could allow long-term crypto holders to use their digital assets for mortgage qualification without the need to liquidate them. However, Rosenfeld emphasizes that the resulting proposals must accurately reflect the reality of how cryptocurrency operates, particularly the legitimacy of self-custodied digital assets.

Some interpretations of the FHFA directive have suggested that crypto must be custodied on a US-regulated exchange to be counted. Rosenfeld argues that this misreads the directive, which states that digital assets must be capable of being evidenced and stored on a US-regulated, centralized exchange. The key phrase here is “capable of being stored,” indicating that the directive calls for assets to be verified and safely handled through US-regulated infrastructure, not for a ban on assets held elsewhere. Verifiability, not a specific custody model, should be the standard.

Self-custody is a fundamental aspect of the cryptocurrency system, offering superior transparency, auditability, and protection compared to centralized exchanges. Collapses of major custodians and centralized exchanges have highlighted the risks associated with counterparty reliance. Self-custodied assets, when properly documented, can be fully auditable through onchain records, which demonstrate balance and ownership. They also offer a higher level of security, as cold storage and non-custodial wallets reduce single points of failure. Additionally, self-custodied assets are verifiable, with third-party tools available to attest to wallet holdings and transaction history.

If policymakers exclude these assets from mortgage underwriting simply because they aren’t exchange-custodied, they risk incentivizing less secure practices and penalizing users for adhering to best practices in crypto management. A sound crypto mortgage framework should allow both self-custodied and custodial holdings, provided they meet standards of verifiability and liquidity. It should also apply appropriate valuation discounts to account for volatility and limit crypto’s share of total reserves using a standard risk-based tiered approach. Clear documentation of verification and pricing methods, regardless of custody type, is also essential.

This directive has the potential to modernize housing finance for a digital age. However, it must avoid the trap of forcing crypto to mimic traditional models just to be understood. We don’t need to flatten decentralization to fit old risk boxes; we just need smart ways to verify it. This is crucial not just for crypto holders but also for the integrity of the mortgage system itself. This directive is one example of a larger challenge facing new crypto policy. From tax reporting to securities classification, too many rules are drafted assuming all users rely on centralized intermediaries. Millions of participants choose self-custody or decentralized platforms because they value transparency, autonomy, lack of traditional intermediaries, and security. Others prefer regulated custodians that centralization offers. Both models are legitimate, and any effective regulatory framework must recognize that users will continue to demand different options.

More technical education about decentralized technology is essential to bridge this gap. Policymakers and regulators need a deeper understanding of how decentralization works, why self-custody matters, and what tools exist to verify ownership without relying on third parties. Without this foundation, future directives, statements, regulations, and legislation risk repeating the same mistake, which overlooks large segments of the ecosystem and fails to account for the full range of crypto industry participants.