British bitcoin investors trying to use their earnings to buy real estate are facing difficulties in securing loans from mortgage lenders. Several building societies refuse to work with them even after they converted the cryptocurrency to fiat and provided a paper trail for its origins.
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Squeamish Mortgage Lenders
A number of UK building societies (financial institutions owned by their members like credit unions in the US) have said that they would not accept any money obtained from cryptocurrency-related transactions. This is despite the fact that there is no law or regulation in the UK which can legally prevent people from paying for a mortgage with fiat whose origin is bitcoin trading.
One broker described to the Financial Times how he was unable to secure a loan for a client because: “The first mortgage lender I rang asked me what a cryptocurrency was. I rang two other lenders and they said they would not touch it. When I mentioned where the money had come from there was massive reluctance to help or understand the problem. I do not believe the mortgage providers in general are ready for this issue and research tells me that a lot more people will be knocking on our doors with funds made or raised in this fashion.”
The Building Societies Association commented: “There is currently no regulation of these electronic currencies, which puts them into the highest risk category in relation to money laundering. In addition, it is well known that such currencies are popular with criminals, who use them to launder the proceeds of crime.”
FCA to Blame?
Other UK mortgage providers and banks are willing to serve bitcoin investors, providing they can prove the exact origin of the money with relevant documents, including Coventry Building Society, Skipton and the Yorkshire Building Society. Lenders said that a lack of clear guidance by the regulator is to blame for the fear of engaging with bitcoin investors.
A mortgage broker explained: “Lenders are so frightened about being hauled over the coals by the Financial Conduct Authority for not complying with anti-money laundering rules that they go beyond what in many cases you and I might consider to be reasonable.” The head of the Association of Mortgage Intermediaries, added that: “The rules are made by governments and lenders and regulators and the first real guidance we’ve had was the speech from (the FCA Chief Executive) Andrew Bailey saying that he didn’t see how cryptocurrency was a real currency.”
The FCA commented: “Our existing rules and guidance related to customer due diligence checks under the money laundering regulations require financial firms to take an approach tailored to the risks they face. We do not currently plan to issue guidance to mortgage brokers and lenders about the specific risks arising from sources of funds being used in housing transactions.”
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