Blockchain-Enabled Mortgage Markets: Tokenization, Alternative Asset Classes, and Financial Stability A Macroeconomic Framework for Distressed Asset Resolution

Abstract

Gazi Arif

This paper develops a macroeconomic framework for blockchainenabled mortgage markets in which distressed assets can be tokenised and converted into tradable alternative investment instruments, facilitating rapid resolution of bank non-performing loans (NPLs) and restoring credit flow during financial crises. We construct a dynamic stochastic general equilibrium (DSGE) model with heterogeneous banks, mortgage portfolios subject to stochastic default risk, and a blockchain-based secondary market for mortgage-backed tokens (MBTs) accessible to alternative investors. The key innovation is a dual-channel resolution mechanism: (i) traditional foreclosure with deadweight losses; and (ii) blockchain tokenisation enabling fractional ownership transfer to specialised distressed-asset investors at transparent marketclearing prices. Smart contracts automate collateral verification, payment-waterfall distribution, and real-time valuation, reducing information asymmetries and transaction costs by 60–75% relative to conventional securitisation. Our calibrated model generates four main results. First, blockchain tokenisation accelerates NPL resolution by 18–24 months, reducing banks’ distressed-asset overhang from 8.2% to 2.4% of total assets during crisis periods. Second, the availability of alternative investment channels increases equilibrium credit supply by 12–18%, dampening credit crunches. Third, monetarypolicy transmission improves: interest-rate pass-through to mortgage rates rises from 0.42 to 0.68 when blockchain infrastructure enables continuous price discovery. Fourth, systemic risk declines: the probability of a financial crisis falls by 35% owing to enhanced balance-sheet repair mechanisms. We identify an optimal regulatory design: permissioned blockchains with qualified-investor requirements, automaticstay provisions during restructuring, and central-bank discountwindow access for MBT-collateralised lending. Quantitative analysis using 2008 US financial- crisis counterfactuals shows that blockchain resolution could have reduced output losses by $1.2 trillion (8.5% of GDP) through faster deleveraging. The framework offers policy guidance for central banks and regulators seeking to harness distributed-ledger technology for financial stability2 while managing risks of market fragmentation and regulatory arbitrage.

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