By Ray Birch
RANCHO-CUCAMONGA, Calif.—Offering a cryptocurrency service can slow, if not stop the outflow of CU deposit dollars to digital dollar platforms, and at the same time the service can also boost use of the cooperative’s mobile solution, according to one person.
Those are some of the advantages of providing crypto services to the membership, said Co-op Solutions, which believes offering the service requires dedicating time and money to member education and gauging the level of member interest in electronic money.
“Anytime a credit union sees deposit outflows, they should be seeking to understand why,” said Dean Michaels, chief strategy officer at Co-op. “If they’re seeing that deposits are flowing to external cryptocurrency trading platforms, you can naturally conclude that members are going elsewhere for this service.”
As CUToday.info reported, Co-op recently announced it is partnering with digital asset solutions provider NYDIG to help members to access digital assets “safely and securely” via their credit union’s electronic banking interface. NYDIG has joined Co-op’s newly launched Strategic Provider Program, giving credit unions access to “pre-vetted, best-in-class products and services” outside of Co-op’s core offerings and helping to streamline their procurement processes.
What the Data Show
The benefits extend beyond keeping more of the members’ money in the CU and strengthening ties with the cooperative, explained Michaels. He said one early-adopter of the Co-op NYDIG partnership saw member utilization of its digital banking app from Bitcoin holders was 40% higher than from non-holders.
That data reinforces the opportunity for credit unions, Michaels posited. He added that the turmoil in the crypto market in the past year, with platforms such as FTX failing, has not changed Co-op’s perspective on the future of the crypto market.
“Partnering with NYDIG enables members to trade Bitcoin through their trusted credit union’s digital banking interface under a white label arrangement, meaning member experience will not be dislocated when they decide to buy or sell Bitcoin via their deposit account,” he said.
Taken a Hit, But…
Michaels acknowledges that “without a doubt” cryptocurrency’s reputation has been taking a hit.
Dean Michaels
“However, we also believe it is an opportunity for companies such as NYDIG, who place such a high emphasis on regulatory compliance. They can be the chosen provider for financial institutions who want to distance themselves from negative associations with, say, FTX by offering a safe haven for their members who still want to engage with Bitcoin,” explained Michaels, who added the CUSO did not want to comment on the recent bank failures that were tied to cryptocurrency. “We are less concerned about predicting the long-term future of crypto within financial services and more focused on the fact that this is a material, relevant opportunity in front of us now and for the foreseeable future.”
He explained that Co-op’s crypto RFI/RFP process assessed each vendor on financial stability.
“NYDIG has a well-capitalized and audited balance sheet that is supported by over $1 billion of investment from the industry’s premier investors,” he said.
‘Should Get Credit Unions’ Attention’
That future could be substantial for credit unions, Michaels believes.
“While it’s too early to speculate on what future credit union adoption of cryptocurrency could look like, research suggests that 50% of crypto-aware consumers are interested in their financial institution offering access to cryptocurrency, which should get credit unions’ attention,” said Michaels. “That being said, NYDIG removes the stigma that many consumers likely have around the trustworthiness of the crypto ecosystem by allowing members to engage in digital assets safely and securely through their credit union, which could be a differentiator for credit unions against direct-to-consumer crypto trading platforms that have come under scrutiny.”
Michaels emphasized, as have many credit unions that are now offering crypto services, that education of members, and the credit union, too, is critical when it comes to offering digital currency services.
“We believe evaluating a cryptocurrency vendor starts with education, not only for members but for credit unions themselves,” said Michaels. “For us, NYDIG checks both boxes, as they provide credit unions with strong support and high-touch guidance from initial discussions all the way through post-implementation. For example, helping credit unions develop internal governance policies around AML compliance for digital assets. NYDIG also has comprehensive digital asset educational materials and expert research available for members.”
Seeking to Make it Easier
Michaels said Co-op sees the NYDIG partnership as making it easier for CUs to make crypto part of their offerings.
“The Strategic Provider Program is designed to help our credit union clients streamline their procurement processes through a referral model and is available to our clients free of charge,” he said. “If a Co-op credit union client is interested in NYDIG after filling out the inquiry form on our website, we’ll then distribute to them our detailed due diligence summary on NYDIG as well as inform them of the preferred commercial terms that Co-op has pre-negotiated with NYDIG for their exclusive benefit.
Ultimately, Michaels said Co-op seeks to equip the client with as much information as needed to determine if they want to pursue a direct conversation with NYDIG about becoming a user.
The decision to play in the crypto space should not be approached too quickly, recommended Michaels.
“As is the case with any new innovation, we encourage credit unions to take the time to fully understand the space before pursing it,” Michaels said. “NYDIG has deep expertise in the digital asset market and offers a dedicated client success team who can walk credit unions through the entire end-to-end journey and answer any questions they may have along the way.”
‘Extensive’ Experience
Michaels pointed to NYDIG’s “extensive” experience with digital asset trading, and the company having more than 35 live implementations with CUs.
“We trust them in coaching credit unions through the exploration process to determine whether digital asset trading is right for them and their members,” he said.
Michaels addressed what led Co-op to become involved with cryptocurrency.
“Despite the crypto winter, there is still demand for credit unions to add a safe and compliant cryptocurrency trading platform,” he said.