Cryptocurrency’s ‘Access’ Issue & How Credit Unions Can Help

Cryptocurrency has captivated our attention here at Cornerstone, and that of many of our members as well. 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.

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, credit unions 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 the 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% and drawing attention in countries such as Vietnam, Pakistan, Ukraine and India. El Salvador has started to accept bitcoin as legal tender. The Cuban government announced plans to regulate cryptocurrencies in the near future.

Major companies across the world have adopted the technology in some form, including Microsoft, PayPal, Whole Foods, Starbucks, Shopify and Home Depot. WeWork accepts select cryptocurrencies as payment for rent. Visa and MasterCard offer crypto-friendly payment services.

In the U.S., cryptocurrency is on the tip of many legislators’ tongues. U.S. Securities and Exchange Chairman Gary Gensler has announced 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.

Determining 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 recommended in a recent webinar that credit unions look at the outflow of their ACH 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,” Bangs said.

Credit unions can employ an Application Programming Interface within their 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 showed 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. Credit unions have an incredible opportunity to gain a competitive advantage over fintechs and leverage their reputations within the community as protectors of their members’ assets.

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?

Caroline Willard is president/CEO of Cornerstone League and its subsidiaries, Cornerstone Resources and Cornerstone Foundation. The Cornerstone League serves more than 400 member credit unions across Arkansas, Oklahoma and Texas.