By Ray Birch
DALLAS—If a credit union is considering offering cryptocurrency services for its members—don’t begin with the members, one CEO is advising. Instead, start with board members.
That’s according to Becky Reed, who said it’s essential to provide careful, calculated and detailed education to members of the board on not just potential crypto platform partners, but also the basics of digital currencies.
“Our credit union did not jump into this out of the blue; I can’t emphasize that enough,” said Reed, CEO of Lone Star CU, who acknowledged the excitement that had been surrounding crypto in 2021 and 2022 had many organizations not wanting to “miss out” on an opportunity. “And we know, now, that feeling no longer exists, with what has happened with the crypto platform collapses in the past year.”
But the $164-million Lone Star, which in 2022 began offering a non-custodial crypto wallet through Bank Social, wasn’t motivated by FOMO, according to Reed. Instead, it was members moving deposits out of the credit union and into crypto, combined with the CU’s continuing focus on technology, that was its motivation.
A Tech ‘Evolution’
“Lone Star credit union has been very focused on technology and innovation,” explained Reed. “When I came here in 2014 as the chief operations officer, I was tasked with focusing on updating our technology infrastructure.”
Reed said Lone Star’s board had been through the credit union’s “technology evolution” and the decision to explore a cryptocurrency offering wasn’t something unusual for the CU’s board.
“The cryptocurrency piece was not something that was strange, unheard of, or unusual for Lone Star to be looking into,” she said. “Our board has been very well educated on the evolution of technology, not just in the credit union space, but what's also happening in our overall economy and in the United States. They're very well read and well versed in this area.”
Becky Reed
Board is Not an Aberation
As Reed further clarified, the expansion into giving members a crypto-option isn’t a move Lone Star made as a result of a board comprised of young professionals.
“I note this because I think it would be short-sighted for a credit union to think that since their board is tenured it can’t be forward-thinking from an innovation perspective,” Reed told CUToday.info. “Since we had been focused on technology and on educating our board for a while, it was not a leap for them to understand crypto.”
Also smoothing the way for Lone Stars directors to sign off on crypto was the fact the CU’s members were clearly indicating it was something they wanted.
Reed, who emphasized that knowledge was derived less from word of mouth and more by what the account activity data was showing, stressed the credit union could see the outflow of funds to crypto platforms. As Reed said earlier, that made for an easlier decision in choosing to work with Bank Social.
https://www.cutoday.info/THE-feature/CU-Offering-A-Non-Custodial-Crypto-Wallet
“And our board, like me, did not want our members having to go outside the credit union for cryptocurrency services, and possibly working with some unscrupulous exchanges,” exlained Reed. “So, it wasn’t like I had to convince the board; they saw what was happening.”
Keys to Wallet, Keys to Education
Reed spent time educating the board on more specific issues, including the differences between custodial and non-custodial crypto wallets. As CUToday.info has extensively reported, with a custodial crypto wallet, consumers do not own the keys to their cryptocurrency and the platform controls the funds. That has led to losses among consumers connected with failed platforms such as FTX, and to the saying, “no keys, no crypto.”
With a non-custodial crypto wallet—consumers control their digital money, not the crypto platform, and own the currency from day one.
Reed also emphasized that it took time—the better part of a year—to slowly work with the board on the decision to offer crypto services, with ongoing education during board meetings with PowerPoint presentations, after-hours with information packets, with experts from Bank Social addressing the group, and more.
“This was never me telling the board this is what we need to do, it was all of us deciding together,” said Reed. “We all came to the natural conclusion that this was the best thing to do for our members.”
Setting an Example
Reed is hopeful more credit unions that want to offer cryptocurrency services will see her credit union as an example to follow.
“I think some credit union CEOs are thinking they’re never going to get their board to go with crypto,” said Reed. “And that is probably not what’s true. It’s really not that hard to convince them if it is the right thing to do for the membership. And don’t think you can’t work on this with a more tenured board. Just because some boards tend to be made up of older generations, that does not mean they're averse to technology innovation. When we began to discuss this with our board, we even found that some were already buying cryptocurrency. This topic was something that was not foreign to them.”