By Ray Birch
PLANO, Texas–Crypto platform NYDIG’s unexpected exit from the credit union space may have reduced CUs’ interest in cryptocurrency for a while, but that interest is returning as credit unions seek ways to retain deposits and relationships as the struggle for liquidity persists, according to the Cornerstone League.
As CUToday.info reported, Cornerstone Resources, a subsidiary of the Cornerstone League, said it is partnering with BankSocial to allow credit unions to offer cryptocurrency to their members, offering buy, sell and hold services.
Cornerstone Resources EVP and Chief Revenue Officer Ryan Dold told CUToday.info that the interest among credit unions in a cryptocurrency solution is once again “bubbling up,” with a greater number leaning toward self-custody.
“When the NYDIG matter happened, credit union interest in crypto declined, possibly dramatically. However, today I think we're seeing a resurgence of interest from credit unions,” said Dold.
Surprise Withdrawal
As CUToday.info reported in November of 2023, NYDIG—which is an abbreviation for New York Digital Investment Group, LLC—was the partner many credit unions and CU organizations had selected as they sought to provide crypto services, especially as data showed members were withdrawing funds to purchase cryptocurrencies from other providers.
When the company unexpectedly exited the CU space and backed out of agreements, it required members to sell their crypto at the current price, which for some was at a loss.
“The value of Bitcoin has increased in recent months. You're seeing this rise in crypto investments,” said Dold. “As credit unions are trying to manage their liquidity, how many dollars are exiting and going to the Coinbases and other crypto wallets? I think it is something that credit unions really have to be aware of just from a deposit-management standpoint. If deposits are getting siphoned somewhere else, we need to have some education and discussion about where those dollars are going. If they're sitting in these crypto wallets, they're not sitting in credit union accounts.”
Ryan Dold
The Crypto Rebound
Dold said from what he and the league have seen, credit union interest in crypto is resurfacing. He also believes credit unions, which previously may have been on the fence about a custodial or non-custodial wallet, have shifted largely to preferring self-custody in a crypto solution.
“I believe there was confusion back in the day,” said Dold. “But the self-custody model puts the power back into consumers’ hands, and that's what consumers are used to.”
As CUToday.info has reported, BankSocial offers a self-custody crypto wallet, where the individual owns their own cryptocurrency and their keys. With a custodial wallet the crypto platform owns the crypto and the keys. NYDIG offered a custodial wallet.
Bringing Self-Custody to the Market
"We partner with the leagues to bring self-custody to their members,” said BankSocial CEO John Wingate. “Remember that all solutions on the market are custodial services, which put all the members and all the credit unions at risk if a failure happens. With self-custody, at worst, only the individual is at risk of losing their crypto because no single event would cause everyone to lose their assets, like what happened with the failure of Celsius, Voyager and FTX, or with a forced sale like NYDIG.”
Dold said the Cornerstone League has been looking into offering crypto services to CUs for 18 months.
“We felt it was something we need to dive into and take it through our due-diligence process. We looked at some options, one being BankSocial,” he said. “We chose BankSocial because we think they have a great product and service to help educate credit unions on how this is going to affect the financial services industry. And, we liked the self-custody model. I think it allows credit unions to play in the crypto market and not really take all of the risk that was there before.”
Not a Niche Market
Dold reminded that 40% of American adults now own crypto, up from 30% in 2023.
“And that could be upwards of 93-million people. We just felt like it's something that credit unions need to keep an eye on and look at options. Credit unions are so busy right now, with the interest rate environment, delinquencies on the rise, there's just so many headwinds. It is our role, as the league, to provide that education, to provide a lookout for what could be coming down the road,” he told CUToday.info. “Right now crypto—good, bad or indifferent—seems to be in our face and something that our credit union industry is facing.”
Dold declined to disclose the details of the agreement between the league and BankSocial.