Lucrative Bitcoin investments may make you a millionaire, but they won’t help you buy a house in the UK.
Lenders are reportedly turning away cryptocurrency buyers offering to fund their deposits from profits made from speculating on alternative currencies.
They claim lending to anyone trading in Bitcoin or other cryptocurrencies, such as ethereum, Litecoin and ripple, is too risky.
Banks and building societies are concerned offering a mortgage to a cryptocurrency trader could land them in hot water over money-laundering rules because online currencies allow crooks to shift large amounts of money across borders without any checks.
One of the attractions of cryptocurrency trading is the market is unregulated and has no supervision from governments or central banks.
High risk for money laundering
“In a case where a customer has been legitimately trading in bitcoin or any other cryptocurrency, and has a verifiable audit trail to show where the money they are putting up as a deposit has come from, there is a reasonable chance of the proceeds being accepted by a lender,” said a Building Societies Association(BSA) statement.
“However, cryptocurrencies are currently unregulated which puts them into the highest risk category in relation to money laundering.
“Right now, the use of proceeds derived from trading in cryptocurrencies is comparatively new and is still pretty rare so there is limited familiarity with them.
“This means that the use of proceeds from cryptocurrencies is a higher risk for financial service providers and there may therefore be less appetite to accept them – it is not a black or white situation.”
Audit trail required by lenders
To have cryptocurrency trading profits accepted as a deposit, the BSA suggests borrowers need to have an independent audit trail showing where their money has come from.
The paper trail should include account statements, emails confirming trades and proof of where the initial investment came from.
The deposit amount will impact the questions lenders ask about cryptocurrency profits – with deposits of less than £10,000 attracting fewer inquiries.
Bitcoin started 2017 worth $900 and hit a peak of $20,000 in December. Since then, the price has swung widely but followed a downward projection. Current trading is around $11,000.