Guest editorial by Jon Ungerland, CIO, DaLand CUSO
For years now, planning session season after planning session season, GAC summit upon GAC summit, credit union leaders have discussed whether the world around us will continue to refer to our cooperative community financial institutions as “credit unions” in years to come – assuming we are still politically or practically able to operate.
Recent events at PayPal, BNY Mellon, and JP Morgan/Ye (Kanye West) can illuminate our thinking about the future value propositions and language that might keep the cooperative community financial services industry relevant.
PayPal Protest
‘Twitterverse’ and the ‘interwebs’ were ablaze this week as consumers, communities, and corporations around the globe vehemently reacted to what PayPal claims was a “mistake” or an “error,” one which mysteriously manifested in a revised version of their terms of service and user agreement. In summary, the global fintech, payments processor, crypto wallet, and problematic neobank introduced new terms which (had they not immediately retracted due to global outcry) would have allowed the behemoth banker to fine its customers/users $2,500 for engaging in transactions or transmitting information on its networks which it deemed to be “misinformation.”
The result: PayPal’s stock plummeted, celebrities, corporations, and consumers flooded social media with screenshots of their #CancelPayPal account closure confirmations, and PayPal was forced to retract its position and urgently pivot to a defensive posture with the public (eventually pleading with customers to take a $15 payout to keep their accounts open!).
So, what can local financial cooperatives learn from this cultural and corporate clash? Communities, consumers, and corporations are demonstrating a potent (and potentially profitable) awareness that they have options for storage and movement of money outside banking institutions. They’re also increasingly aware of the freedom of voice and choice beyond the app/tech hegemonies of mega-corporations. The world now is not as it was in 2008, when central bankers and Wall Street firms managed to squash the Occupy Wall Street movement. A decade plus further down the road, disenfranchised customers and consumers have new pitchforks and fuel in hand: decentralized finance networks and tools like Bitcoin, DeFi apps, distributed ledger technologies, privacy coins/currencies, etc. More on this in a minute …
BNY Mellon Bitcoin Bombshell
“The 238-year-old bank won the approval of New York’s financial regulator earlier this fall and is the first of the eight systemically important U.S. banks to store digital currencies and allow customers to use one custody platform for both its traditional and crypto holdings,” reported the Wall Street Journal on 10/11/22. Although the news pertains to BNY Mellon’s institutional customers, #banking and #bitcoin Twitter exploded in reaction to this latest addition to the “W” column for the crypto/digital asset class.
Community financial institutions and their regulator/advocacy institutions are now officially behind the curve in providing guidance explicitly recognizing crypto custody services as strategically significant and value-add services community FIs can offer to local commercial and individual constituents. BNY explicitly acknowledged the need to custody digital assets on behalf of their institutional customers, as their customers are now looking to safeguard their digital assets alongside their traditional investments and capital. Further, bank leadership noted Bitcoin and crypto are just the “tip of the spear” piercing the world of value which is digital token networks and digital assets.
This in the same week that FASB provided clarity on bookkeeping/accounting for Bitcoin! Uncanny, eh? So, as Federal Reserve agent banks and other banking Goliaths get into the business of stewarding digital money data for profit and market cap growth, exec teams and boards can conservatively (reactively) and safely conclude it’s time for your community FI to focus on financial literacy and look at building operations to ensure you can stay in the business of value storage and movement for your community members. As crypto-accounting advocate and corporate Bitcoin investor Michael Saylor, CEO MicroStrategy Inc., succinctly stated in response to this BNY news, “For banks to hold their value, they'll need to hold what their clients value. #Bitcoin.”
JP Morgan/Ye (Kanye West)
In a bizarre and rapidly developing example of the constant corporate and individual values collisions of our time, banking troll headquarters at Castle Grayskull … oh, wait … oops, it was JP Morgan Chase announced to the world on October 13th they would be terminating their accounts and customer relationship with rap celebrity and cultural icon Ye (Kanye West). While it’s reported the customer service letter provided to Ye does not detail why Jamie Dimon’s den of dollar goblins believed it was necessary to excommunicate their high-profile customer, Ye and his immense collection of institutional and individual followers are alleging the decision is connected to recent public appearances, speeches, and social media posts by the controversial pop culture icon.
So, what does all this big money rap battle news have to do with your local FI? Simple, the story resulted in a surge of social media and alternative media chatter that can be broadly summarized as: If they can do this to him, imagine what they can do to us!
Individuals and institutions around the globe connected the controversy to a wide range of related topics, including cryptocurrency, decentralized payments, helping speed adoption of non-institutional money, spotlighting the dangers to free speech and private wealth represented by hyper-centralized corporate and bureaucratic power centers, and even sparking a resurgence of shares and posts of an interview with Ye in October 2020 wherein he mentions bitcoiners and Bitcoin as potentially the true safeguard of liberty for America.
One wonders if that may have been the origins of JP Morgan Chase’s motive for adverse action (as opposed to recent controversial tweets). Anyhow, in these early days of the era of decentralization, during this late-stage institutionalism and the questionable footing of our fiat-based banking businesses, community financial institutions would do well to publicize themselves as compatible bastions for the economic and monetary ideals energetically catalyzed by this event. Ye and his millions of devout disciples might like to know there are local, collaborative, mutually owned and managed institutions committed to safeguarding wealth while securing and stewarding capital (digital or dollar) toward ends other than censorship, control, and exclusion.
There is a common thread that runs through all these recent events: institutional control of capital (power) vs. individual economic and social liberty. In recent years, especially in past months, I have been amping up the volume on my simple opinion regarding the future name and nature of the noble cooperative community financial services industry (because let’s be honest, that descriptor is too many characters for effective Twitter marketing campaigns). Whatever we call these honorable local institutions, the leaders of these local wealth and value silos must confront the uncomfortable and increasingly unveiled fact our world is hurling toward a difficult reality of parallel economies (and currencies); community institutions will have to shift to stewarding new types of data and value if they intend to continue contributing to local financial literacy and flourishing.
Business strategies, technology investments, and operational buildouts of the next few years are likely to define whether your community financial institution remains a local storehouse for the fruits of community labor (regardless of whether those harvests are the comfortable currency of dollars or newer commodities like crypto, digital assets, and/or tokenized property). Current events should make clear the probability banking execs and boards will find themselves navigating socially and economically charged schisms as central bankers and mega corporations push for central bank digital currencies (CBDCs) and centralized, programmable digital passports and wallets combined with new credit and compliance systems. Meanwhile, institutional and individual constituents of your community already have access to new global value storage and payment networks (like Bitcoin), and simple surveys of social media demonstrate surging awareness and willingness to leave the matrix if it means they can preserve wealth, protect freedoms, and prevent their own forced participation in and submission to modern schemes of usury and economic exclusion.
One thing is certain; cryptobanking is repeatedly appearing as the intersection of corporate and individual culture and capital collisions. Money is morphing. Wealth won’t wait around; it will reemerge in new networks as a streaming phenomenon (with or without banks), bringing market cap and creative freedom – paralleling the cultural and industrial phenomenon of the internet in the late 1990s and early 2000s.
If there will be “credit unions” in the future, our own roots of cooperative, decentralized, democratic control of capital would seem to demand we pivot strategies, products, and services to continue connecting to our communities and their capital in the digital world beyond the electronic dollar.
Let’s do decentralization and digital financial literacy democracy together!
Peace and prosperity.
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