By Ray Birch
DALLAS—Following the collapse of several crypto platforms and the ensuing precipitous drop in consumer digital currency confidence, what’s the future for crypto at credit unions?
One CEO of a credit union that stepped into the crypto arena last year told CUToday.info that while crypto deposits flowing into its offering have slowed, there are signs activity is beginning to rebound and the organization has no plans to change course.
Becky Reed, CEO of $163.5-million Lone Star CU added that educational efforts around crypto services must be increased today, given the likelihood members will now have more questions and concerns.
Reed said she does believe stronger interest in cryptocurrency will return, but not soon to the levels seen in early 2022.
“I don’t think we will see that crazy intertest in cryptocurrency that was driven in part by all the crypto adds during the 2022 Super Bowl,” Reed said. “The price of cryptocurrencies fluctuates heavily, and Bitcoin in particular, whose value has dropped in the last year. And then there is the FTX collapse, which was the most public and well-known crypto exchange. For people who always thought cryptocurrency was just a Ponzi scheme, that just reinforced that thinking.”
Reed thinks the effects from the crypto winter is being felt most among consumers who were just starting to get into digital money—dabbling in it and curious.
Lessened Sense of FOMO
“In 2022 there was the fear among consumers of missing out on an opportunity,” recalled Reed. “I think those people have now quickly exited this market. The FTX collapse brought to light the danger of custodial crypto wallets.”
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.
As CUToday.info has reported, the attention, apparently, is growing among CUs for a non-custodial wallet.
The 10,8700-member Lone Star Credit Union partners with Bank Social, which offers a non-custodial crypto wallet.
Becky Reed
Reed said she has always been pleased with the credit union’s decision to offer a non-custodial wallet, and Bank Social also offered some savings and ease of entry for the credit union. Now, with today’s crypto environment, she said she is even more satisfied with the choice.
‘Zero Negative Feedback’
Reed acknowledged questions surrounding the CU’s crypto offering may be percolating in the minds of members, but added the organization is not hearing any concerns from those who hold crypto and from those who don’t.
“We have had zero negative feedback from our members to this point,” said Reed. “If you're not already interested in cryptocurrency at this point, you're probably not going to be. You're not going to do it just because your credit union is offering it.”
A Slowdown in Deposits
Despite the lack of member concerns, Reed did acknowledge deposits into Bank Social through Lone Star members have slowed.
“Late in 2021 and early 2022 we were seeing up to 10% of our assets a month going out to cryptocurrency exchanges, which led us to offering our own solution through Bank Social,” explained Reed. “But that interest has since passed and the outflows are less. The problems the crypto market has faced have reduced the interest, from what we can tell through our data. But in the last 90 days we're seeing the activity begin to tick up again. It’s like the stock market; it will bounce back.”
The Importance of Communication
In the meantime, in a time of greater crypto uncertainty Reed emphasized the importance of strong member communication around the CU’s crypto offering. She stressed that it’s not just communication around how the wallet works, how the partnership with Bank Social works, how members own their keys, but also about education around crypto in general.
“Despite all of the attention recently around ‘not your keys not you crypto,’ I still think there is a lot of confusion, especially around custodial and non-custodial wallets,” Reed said. “There still needs to be education around that. We’re stepping up our educational efforts. And Bank Social, as well, has excellent educational resources our members know they can access.”