The second-largest mortgage lender in the United State, United Wholesale Mortgage (UWM), will discontinue accepting payments in cryptocurrency. After introducing a pilot program for crypto payments in August, CEO Mat Ishbia says it has not proven to be worth it,
“Due to the current combination of incremental costs and regulatory uncertainty in the crypto space, we’ve concluded we aren’t going to extend beyond a pilot at this time,” said Ishbia.
During the pilot program, UWM accepted three types of cryptocurrency — BTC, ETH, and DOGE. It also worked with several different borrowers to understand how the process would work. By September, UWM had successfully accepted its first cryptocurrency mortgage payment, followed by another five in October.
Although borrowers “liked it” and “said it was cool,” Ishbia acknowledged that paying in crypto “wasn’t a driver” for the firm. “There was not enough demand at the end of the day to really push the envelope too hard,” he said.
Capital gains problems for crypto payments
Although regulators have no plans to impose restrictions on cryptocurrency trading, the proposed infrastructure bill contains new reporting requirements for cryptocurrency “brokers.” Consequently, prominent players in the space, such as Coinbase and Andreessen Horowitz, have tried to elicit greater clarity from regulators.
Current regulations also present a hidden cost to using crypto for transactions that could inhibit further payments. The IRS classifies digital currencies as property, not currency, making any payment in crypto a taxable event. As a consequence, the six homeowners who took part in the pilot program may now have to face a tax bill for the payments they made in crypto.
However, Ishbia said that the company could reintroduce the policy at any time if enough demand presents itself. He noted that as crypto “becomes more mainstream, we’re able to turn it on any day. We know how to do it now.” Based in Michigan, the United States’ second-largest mortgage lender made its public debut in January via a special purpose acquisition (SPAC) merger.