NCUA Experiments With 'Crypto Parenting'
The NCUA's oversight of CU cryptocurrency services can be compared to a leery father monitoring his kids on the playground.
Simply understanding cryptocurrency is a challenge in itself. When doing research or prepping for an interview about crypto, I feel like I have a steady grasp of it for about 30 seconds and then it slips away again. It’s like experiencing Pokémon Go when my kids first tried it out five years ago.
OK, you’re playing an AR game to capture and battle creatures on your phone while at a park with a bunch of other kids doing the same thing at the same park. No one talks to each other and I’ll just stand here with baseball gloves and juice boxes until you’re done? Uh, cool.
I slowly learned the Pokémon culture just to keep up, and would keep an eye on the boys’ progress while I drank from their juice boxes.
Similarly, that’s how it seems the NCUA has approached cryptocurrency for credit unions – as a leery, juice box-drinking parent side-eyeing the kids and allowing this techno progress to continue while thinking about the risk to their health and wondering if they are wearing enough sunscreen.
I’ve started calling this “Crypto Parenting.” Soon, I may launch a series of crypto parenting books, including: “Skinned Knees and Crypto: (Investing) Accidents Happen,” “How to Really Love Your Crypto,” “How to Talk to Your Pre-Teen Crypto” and “When Your Crypto Won’t Move Out of Your Basement.”
Like life, cryptocurrency can be extremely difficult to navigate if you don’t know what you’re doing or what to expect.
Six months ago, NCUA Board Chairman Todd Harper (dad) took a very important and significant step in his Crypto Parenting journey by providing credit unions with some clarity. In December, Harper released a letter to credit unions that allowed credit union executives “to establish relationships with third-party providers that offer digital asset services.” Meaning, credit unions can start dating! But, first, we need to have “the talk.”
The letter stated, “A FICU’s relationship with third parties offering these services and related technologies will be evaluated by the NCUA in the same manner as all other third-party relationships. This includes a FICU exercising sound judgment and conducting the necessary due diligence, risk assessment and planning when choosing to introduce or bring together an outside vendor with its members. FICUs should establish effective risk measurement, monitoring and control practices for such third-party arrangements.”
As a good parent, Harper seemed to understand when others might need to step in to help with crypto issues in that some cryptocurrency activities will fall under the jurisdiction of other regulatory agencies, including the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Financial Crimes Enforcement Network and individual state agencies.
This move opened the door just enough that numerous credit unions began offering services allowing members to buy, sell and trade cryptocurrencies, with very little risk to the credit union.
Weeks after Harper’s first letter, PSCU launched a microsite as a way to educate credit union leaders in the ways of cryptocurrency. The CUSO then announced its new “Digital Consulting Practice,” which helps credit unions enhance the digital return on investment and/or elevate a credit union’s product utilization.
“In today’s digital-first world, it is critical for credit unions to keep a pulse on digital trends and preferences in order to meet – and ideally exceed – member expectations,” Yvonne Stelpflug, SVP, Advisors Plus at PSCU, said. “Through our Digital Consulting Practice, we can help credit unions make informed decisions about their digital roadmaps and member journeys, while also positioning them for growth and success now and into the future.”
I call this “Crypto Co-Parenting.”
After a handful of months when things were going well, Harper released another letter in late May to credit unions that stated distributed ledger technologies are OK to use if they are within existing regulations and safety limits. Meaning, curfew is now 11 p.m. for credit unions. Just call if you’re going to be late.
“As with the development of any new product or service when deploying a platform, product or service using DLT as part of the underlying technology, credit unions should find an appropriate balance between the opportunities and the risks,” he wrote.
“This letter also signals to the broader financial and technology communities that credit unions are a market to consider when designing products, considering partnerships or making investments,” Harper stated.
Even the industry’s other co-parents (you know, those that sit on the park bench judging your parenting style while eating their kid’s Goldfish crackers) were excited at this new crypto-acceptance by Harper.
Greg Mesack, NAFCU’s SVP of government affairs, thanked the NCUA for “for reducing regulatory uncertainties around digital assets.”
“There is without a doubt a need for additional guidance from regulators on how credit unions can better adopt digital assets and emerging financial technologies,” Mesack said.
“We appreciate that the NCUA heeded our call to adopt a form-agnostic approach to assessing how credit unions use digital assets and related technologies,” he said. “We will continue to articulate the credit union industry’s perspective on this topic and encourage the NCUA to continue building a sound digital assets regulatory framework.”
Cool parent Ryan Donovan, and CUNA’s EVP and chief advocacy officer, said, “Many questions will likely persist regarding credit unions’ ability to participate in the digital currency space. We look forward to more detailed guidance from the NCUA on these issues as credit unions continue to explore the benefits of these technologies for their membership.”
Once Harper’s letter hit the streets/playground, we saw another significant round of credit union executives announce that their new crypto products and services had come to life.
The $3.9 billion Stanford Federal Credit Union in Palo Alto, Calif., unveiled its new crypto offerings, as well as its partnership with NYDIG and Q2 Software Inc., two fintech powerhouses (the cool kids).
“Stanford FCU recognizes the power of cryptocurrency in today’s e-commerce ecosystem. We want to make the process of using Bitcoin as streamlined, secure and user-friendly as possible for our members,” Stanford FCU President/CEO Joan Opp said. “We see both a need and opportunity here to support our members’ evolving needs while leveraging technology in a way that enables them to use cryptocurrency seamlessly in their everyday lives.”
The $2.6 billion Achieva Credit Union in Dunedin, Fla., became the first credit union in the Sunshine State to offer Bitcoin services to members. Like Stanford FCU, Achieva partnered with NYDIG to connect crypto services to its mobile app so members can buy, sell and trade cryptocurrency.
“In the past year, we noted our members trading in more than $2.6 million of cryptocurrency through popular trading platforms,” Achieva Chief Digital and Infrastructure Officer Tracy Ingram said. “It was clear that many members want to get involved with crypto, and we felt it was time to provide access to Bitcoin from an institution they trust.”
Parenting is hard. When you’re the parent of an entire financial sector, many people will tell you that you’re raising your kids wrong, so to speak.
In the case of Harper’s latest examples of laying out new house rules/guidance, he’s made some very important and sound moves to help a fledgling industry follow what will hopefully be a path to a better crypto future, full of credit unions making good choices as they venture out on their own and out of the basement.
We should expect more crypto parenting advice in the months ahead.
Until then, you can read my latest book, “Teaching Your Crypto How to Shave.”
Michael Ogden Editor-in-Chief mogden@cutimes.com