By Ray Birch
SCOTTSDALE, Ariz.—Could all of the bad news about cryptocurrency be good for credit unions?
One analyst believes that could be the case, and that cooperatives, due to their high trust factor, can someday become the institutions more members look to for crypto services.
Cornerstone Advisors President Steve Williams contends what has led to many of the cryptocurrency platform failures is poor governance within those organizations.
“Crypto is not going to go out of style,” he said. “However, in order for an institution to have trust, it needs to have governance. It needs to have risk management. It needs to have outside parties testing its integrity. A lot of (the cryptocurrency platform failures) were due to a breakdown of governance.”
Williams acknowledged consumers’ trust in cryptocurrency has been shaken, evidenced by the huge drops in crypto values this year and report sof the losses many have suffered.
All of that can only reinforce the off-balance sheet very much enjoyed by credit unions, and that is the faith of their membership that they are well run and offers services that are in members’ bests interests, he said.
Dovetailing Nicely
Steve Williams
And that trust and respect dovetails nicely with consumers who still want to be invest in crypto, according to Williams. He said the past year’s so-called crypto winter and the recent platform failures—such as the massive FTX collapse and now BlockFi—should not be viewed as the death of digital money. Instead, he believes credit unions should be looking at how they can fit into this changed landscape.
As CUToday.info has reported, a growing number of credit unions are offering cryptocurrency services, allowing members to buy, sell and hold the electronic money. Some have even been considering allowing members to use their digital investments as collateral to for loans, although the shifting values complicates that idea. Most of the credit unions that have have entered into this space have done so by partnering with NYDIG, but not all.
Williams said despite the environment and news headlines, now is not the time for credit unions to step back from considering offering crypto services.
“I see it as another trusted service that credit unions can provide,” he stated. “There already is a fairly large percentage of Gen Y and Gen Z who own crypto, primarily Bitcoin and Ethereum.”
A Different Opportunity
Willliams agrees overall member interest in cryptocurrency has cooled, and that fewer dollars are moving out of CU deposits to crypto platforms today.
“We are not seeing money movement like we saw about 10 months ago, driven by all those Super Bowl commercials,” he said.
The opportunity is different in the current environment, continued Williams, who advocates for marketing crypto services centered on consumer education, as many people lack a clear understanding of digital money and how they can participate.
“There's an opportunity to educate the member base,” said Williams. “Gen Y and Gen Z already know a lot about crypto, but they're probably looking for the convenience of integrating crypto into their financial lives. Financial education is a credit union strength, and they should educate members about cryptocurrency.”
Changing Up the Messaging
Williams also believes the message to younger members must be different than what the credit union delivers to older account holders.
“I think the main point is there is a chunk of young members who already are aware of cryptocurrency and may even own crypto, but they now have a bit of a challenge on institutional trust,” explained Williams. “This is a time to tell them that they are already familiar with their credit union and that you have a better institutional solution for them.”
Whether credit unions partner with NYDIG or another platform, such as BankSocial, Williams contended that what is happening now in the crypto space is a “shaking out” and consolidation of platforms.
“We’re moving away from the Wild West that had previously been the cryptocurrency market,” he told CUToday.info. “There will be certain digital currencies that survive, grow and evolve. For the future, this could be a good move for credit unions.”
Not for Short-Termers
But it is not a short-term effort, Williams stressed.
“When I say opportunity, it's not the next nine months. We’re in a long game now. With the integration of decentralized finance and traditional finance in the rest of this decade…Getting involved with cryptocurrency, for credit unions, is more of a long-term strategy,” he said.