Major US investment bank Citigroup has shared research on crypto-backed mortgages and digital real estate in the Metaverse.
In a research titled “Home of the Future: PropTech – Towards a Frictionless Housing Market?” Citigroup writes that crypto, blockchain and property in the Metaverse have the potential to transform the traditional real estate market.
Crypto Backed Mortgages
Citigroup states that mortgages linked to crypto make it possible for investors to take advantage of their capital gains without paying wealth tax. Incidentally, this mainly applies to the American market and tax rules. But despite that advantage, Citigroup also sees certain risks related mainly to the volatility of the market.
Although the standard mortgages linked to fiat money have certain rules if the market goes against you, this does not apply to crypto. People with a crypto mortgage could be forced to make significant contributions if we get into a heavy bear market. Something that cannot be completely ruled out given the history of crypto. Also at this moment we are going through a long dark tunnel that seems to have no end.
“If the value of the cryptocurrency in question falls, the borrower could face margin calls and eventually see their crypto assets liquidated,” Citigroup said in the study. Adding cryptocurrency to a loan increases the risk of the loan in question, according to Citigroup.
Digital real estate in the Metaverse
In addition to the statements about crypto-backed mortgages, Citigroup also writes about the Metaverse in the survey. In the piece, Citigroup focuses in particular on The Sandbox, where individuals and businesses primarily view their digital real estate as an investment, comparable to real-world real estate. The rates for a piece of land in January 2021 were still around 100 dollars, while a year later you had to pay 200,000 dollars for some pieces.
“Given the stage these projects are in, many digital land buyers probably don’t have a concrete plan for their digital property and are simply speculating on the growth of the platform and thus an increase in the value of their investment,” Citibank said. The Sandbox. Citigroup doesn’t seem completely convinced about crypto and the Metaverse yet, but that they are devoting an entire study to it is certainly promising.
