CUNA O&ME/Tech Conference: Expert Provides a Crypto Masterclass
By John San Filippo
On Sept. 23, 2022, in a keynote session at the CUNA Operations & Member Experience and Technology Councils joint conference, crypto expert Lamont Black, Ph.D., spent 90 minutes telling the audience about “Cryptocurrency, Blockchain, and the Future of Financial Technology.” For anyone wondering about where cryptocurrency and blockchain fit in the grander scheme of financial services, it was time well spent.
Black told the audience that he was only introduced to the credit union movement this past January when he was asked to speak at a NASCUS event, but since has come to believe that credit unions are especially well-positioned to leverage crypto and blockchain. “In January, I gave a talk to some credit union CEOs and that started this whole personal journey for me of getting to know credit unions, getting to understand what you're about, and then thinking about how all this new technology relates to credit unions,” he explained. “And I'll be honest, I think it is a good cultural fit for you. Some of you might feel crypto and blockchain are from Mars and we're on Earth, like how is this relevant?”
He continued, “I'm going to draw some connections. I think it is very relevant because when I think about what I've learned about credit unions, I think about a focus on member financial wellbeing. That laser focus on member experience, improving members' lives and then ultimately growing the business. We want credit unions to be around to be serving more people, serving people in younger generations.”
Explaining the Basics
“Almost all of us have now heard of blockchain and I think we have this understanding that blockchain is a technology and I think all of us know technology is important,” said Black. “[Technology] is changing the world that we live in. Digital transformation is here and it's getting faster and faster.”
According to Black, people often conflate blockchain and cryptocurrency. He made it clear to the audience that blockchain is a technology and cryptocurrency is just one of potentially many applications that are based on blockchain technology. He pointed to Bonifii’s digital identity product, which has nothing to do with cryptocurrency, as another blockchain-based application. He added that blockchain and its underlying applications make up an emerging ecosystem.
“One thing I don't like about crypto is that it's turned into this kind of love-hate relationship,” he told the audience. “Some people are convinced that this is the future – we have to be doing it. And then there's a lot of people, probably some of you in this audience, that think crypto is, you know, a super bad idea and it's basically worthless.”
Black posited that that cryptocurrency is simply the implementation of a technology and, like any other technology, is neither good nor bad. “Technology's just a tool,” he said. “These tools can be used for bad purposes. They can be used for good purposes. That's true of any technology.”
Regardless of varying opinions, Black claimed that every credit union needs a crypto strategy. “You have to form a strategy, even if the strategy is, we don't do that,” he said. “You can't just bury your head in the sand and hope this is going to go away. Because even though we've had this massive bear market, we're in this crypto winter, it's not dead. You might hope it's dead, so then you can kind of move on and forget about it. It's going to come back. And this is perfect timing to prepare for that next wave.”
Meeting Member Needs
“If you think about financial wellbeing of your members, then you have to ask the question: If many of your members are crypto curious – and I would argue that they are and many – do you want to just step back and say, ‘Well, you figure it out,’ or do you want to step in and say, ‘Let's figure this out together’?”
The key, said Black, is deciding how to meaningfully engage with members about crypto. However, he also said that creating an institution-wide culture of innovation is a prerequisite to this engagement. “Start now, if you haven’t already, fostering a culture of innovation,” he admonished the audience. “Whether you like crypto or blockchain or not, credit unions as an industry can't just play defense. We don't live in a world anymore where you can just circle the wagons and protect the charter doing what you've always done. The world is changing around you. And if you don't adopt an innovation mindset or an entrepreneurial mindset, you're not going to adapt quickly enough.”
The Cryptocurrency MAP
Black introduced the audience to the acronym MAP, which stands for Money-Asset-Platform. The platform, in this case, is blockchain. Money and assets represent two different use cases for cryptocurrency. Black said it’s important to recognize the difference between cryptocurrency as money, i.e., a payment mechanism, and cryptocurrency as an asset, i.e., an investment vehicle. He noted that crypto payments represent only a small portion of the global payments volume and that more emphasis is currently placed on crypto as an investment.
Black characterized blockchain as an “emerging platform” for financial services, noting that it has four important and unique characteristics:
Blockchain is a system for shared record-keeping.
Blockchain is a distributed ledger technology, or DLT.
Blockchain is a “single source of truth” that does not require reconciliation.
Blockchain is decentralized, i.e., a network consensus mechanism.
Black predicted an eventual convergence of the digital and physical worlds based on blockchain. For example, he proposed several possible real-world applications for non-fungible tokens, or NFTs. These include legal records of ownership, e.g., the deed to real estate or the title to an automobile. “These are different use cases for blockchain, all of them relevant to you,” he stated. “These are not people just gambling to get rich. It's not just people posting crazy pictures on the internet and overpaying for them. This is technology that is gradually going to be applied more and more toward financial services.”
Black told the audience that the most likely starting point for any credit union interested in offering crypto-related financial services is a self-directed crypto investment account. “This is the current entry point for credit unions into crypto,” he noted. “Many of you might be aware there's a leading fintech partner. And so we now have a number of credit unions where their members can buy Bitcoin through the credit union.”
That said, he offered some caveats. “I actually don't love this, especially if it becomes a dead-end road,” he said. “What do I mean by that? First of all, education. Each of these providers is going to have their video material so that their members can watch a couple things and then start buying. But how much do your members understand what crypto is?”
Credit unions owe it to their members, Black said, to make sure they’re well-informed. “We need more financial literacy [around crypto],” he stated. He added that it’s important to educate members before your credit union offers crypto services. “Just start to get your members up to speed before you roll something out so that you have some of that financial knowledge going into this issue.”
Black also pointed out that there’s reputational risk for the credit union if members suffer substantial losses from crypto assets managed through their credit union account, even though the account is self-directed. “What about financial advice?” he asked. “[Members] can buy whatever they want and if it blows up in their face, that's their problem. We've got to figure out the wealth management aspect of this. If you have a wealth management part of your credit union, I would strongly encourage you to think about how this fits into helping people with their portfolio.”
“I've given you a map,” Black offered. “Just think about the potential for money. Tie all your crypto conversations back to the member.” He concluded by reiterating the MAP:
M: How can you improve digital payments for your members?
A: How can you help your members manage digital assets?
P: How can you use blockchain to provide better member services?