As Bitcoin and other digital currencies exploded in value in the last year, many investors enjoyed a dramatic return on their investment. Some of those fortunate investors have apparently decided to harness some of that newfound wealth and use it to purchase real estate in the UK. On the surface, that might seem like a prudent decision, given the ongoing volatility in cryptocurrency markets. In practice, however, many UK investors are experiencing unexpected resistance from the country’s lenders.
According to a recent report in the Financial Times, those mortgage companies have been reluctant to provide loans to would-be homeowners who have made their money in the digital currency markets, due to concerns about potential money-laundering and other criminal activities. As the report notes, “even after converting their profits to sterling, lenders were not satisfied that they could trace the source of the money.”
There are no rules in the UK that prevent mortgage companies from accepting deposits derived from digital currency transactions, of course. In fact, the Financial Times suggests that a number of lenders have expressed a willingness to accept money that originated with digital currency sales.
However, banks that provide mortgage services do need to ensure that they can identify the source of the funds to ensure that they comply with strict money-laundering regulations. As John Charcol broker Ray Boulger told the Financial Times:
“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.”
To get around those restrictions, Boulger suggested that borrowers adopt a more patient approach by leaving the money in their bank accounts for several months before trying to get a mortgage:
“In practice, if you use money from your bank account for a deposit, lenders will typically ask to see three or six months bank account statements. So if you’ve had money in your account since before then, the chances are it won’t be a problem.”