Cryptocurrency’s ‘Access’ Issue and How CUs Can Help

Caroline Willard, President/CEO, Cornerstone League

Cryptocurrency has captivated our attention here at Cornerstone, and that of many of our members as well. Cornerstone members recently joined us for an informative webinar—led by bitcoin investment and technology solutions provider New York Digital Investment Group (NYDIG)—on bitcoin basics and credit unions’ role.

As crypto creeps into the mainstream, it’s important to have some basic knowledge of digital assets and how credit unions can use them to serve their members. The webinar served as a milestone in helping our members understand how credit unions can maximize the opportunity to incorporate cryptocurrency into their business plans.

First, let’s talk about what cryptocurrency is not. It is not traditional fiat currency. There is no checkbook for consumers to carry around and no debit card to swipe at the store. As a digital asset that can be transferred without the assistance of a financial institution, cryptocurrency’s almost ethereal existence, thus far, can be described as invisible or even mythological.

But it’s definitely real.

While it’s true that cryptocurrency holders do not need financial institutions to access their assets, financial institutions can seize the opportunity to facilitate the experience and help retain our market share.

One early step credit unions can make is to help regulators understand how they intend to incorporate crypto into their operations and identify potential obstacles. In late July, the NCUA issued a request for information asking credit unions to submit their comments on digital assets. The RFI comment period ends Sept. 27, 2021.

In a statement, NCUA Chairman Todd Harper said, “While we should recognize and harness the potential opportunities these products and technologies offer, we must also recognize the potential risks they pose to the credit union system and the broader financial services sector and develop appropriate guardrails.” 

During the comment period, credit unions are invited to provide guidance on the regulatory language NCUA should use and identify specific ways they wish to use cryptocurrency, plus possible obstacles. It’s important that credit unions articulate what we want to do regarding cryptocurrency to help the NCUA determine friction points.

Captivated by Crypto

What’s the appeal of cryptocurrency? For one thing, it’s accessible anytime and anywhere there is access to internet. This feature alone is appealing to consumers worldwide who prioritize low transaction fees and speedier processing.

Cryptocurrency also offers a financially inclusive element to consumers. Its accessibility has made it possible for the unbanked or underbanked to conduct peer-to-peer or cross-border transactions without having to step foot into a financial institution. This democratization of money has created new investment opportunities for the middle class and in some cases, served as a lifeline to international travelers who were grounded in another country during the worldwide pandemic lockdown.

According to crypto-analysis firm Chainanalysis, global crypto adoption among ordinary investors surged in the past year, rising by more than 881%. The top countries in the ranking include Vietnam, India, Pakistan, and Ukraine. El Salvador has started to accept bitcoin as legal tender. And the Cuban government recently announced its plans to regulate cryptocurrencies in the near future.

In the retail sector, major companies now accept cryptocurrency including Microsoft, Sotheby’s, and Coca Cola. WeWork plans to accept crypto for rent. Wall Street banks are offering digital currency funds to select high-net-worth clients.

In the U.S., cryptocurrency is on the tip of many legislators’ tongues. U.S. Securities and Exchange Chairman Gary Gensler has alluded to plans to regulate crypto exchanges and decentralized finance platforms, telling CNBC, “I’m pro innovation, but we also need rules of the road.”

Cryptocurrency taxation is a hotly debated topic within the context of the U.S. Senate’s infrastructure bill, as crypto advocates push back against lawmakers to clarify the definition of “broker” within the bill.

Currently, there are 125 million credit union members in the United States, a sizable consumer market, many of whom are already interested in cryptocurrency. If you have had members ask about your credit union’s capabilities around cryptocurrency, it’s important that you or a designated officer at your credit union are able to answer those questions.

Determine Whether Crypto is Right for Your Credit Union

When it comes to determining whether cryptocurrency is right for your credit union, NYDIG Relationship Manager Tammy Bangs recommends that credit unions look at the outflow of their Automated Clearing House transactions, which will give them a close look at what’s going on with membership.

“A credit union’s ACH transactions outflow is a great indicator of what’s going on with a credit union’s membership,” said Bangs.

Your credit union can employ an Application Programming Interface within your ACH payments system, which can provide more payment options for your members and speed up the transaction process. ACH APIs minimize the risks commonly associated with standard ACH transfers, since highly secure crypto coins are used as verified payment.   

According to a March 2021 survey by NYDIG, 22% of U.S. Financial Advisory clients hold bitcoin, but only 3.5% of them hold bitcoin with their advisors. Crypto holders are more likely to engage with their financial institutions if the services are offered. Yet a Cornerstone Advisors survey shows that 79% of financial institutions have no interest in offering cryptocurrency investing services. 

Clearly, cryptocurrency is experiencing an access issue, not a crypto issue.

Besides accepting cryptocurrencies as assets, credit unions may consider offering crypto custodial services, crypto-based debit/credit card rewards, and interest enhancement, just to name a few.

There are just a few weeks left for credit unions to submit comments to the NCUA’s request for information. How will your credit union incorporate cryptocurrency into its operations? Do you see an opportunity for your credit union to provide custodial services? What about crypto-based debit/credit card rewards?

If you’re still considering your credit union’s options, perhaps our recent cryptocurrency webinar featuring leaders from New York Digital Investment Group (NYDIG) will help. If you did not get a chance to attend the Aug. 24 webinar, you may access a recording here.

Gain a competitive advantage over fintechs and leverage your reputation within your community as a protector of your members’ assets. Let cryptocurrencies boost your competitiveness in today’s increasingly digital business environment. Cornerstone League is here to help as you compile your RFI comments and determine ways you can incorporate crypto into your credit union’s operations. Let us know where you are in your crypto journey by filling out this quick survey. Please reach out if you’d like to brainstorm some ideas on how crypto might work for your credit union.