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  • Writer's pictureRoy Urrico

Trying to Attract Credit Union Interest in Cryptocurrency

Photo by RODNAE Productions from Pexels.

By Roy Urrico

Deloitte’s 2021 Global Blockchain Survey report, released in October 2021, found everything had changed for blockchain, digital assets, and financial services over the last year or so — and not only due to the COVID-19 pandemic. “The proliferation of digital everything as both a means of exchange and a store of value has expanded significantly, with a seismic shift impacting the global financial services industry (FSI).”

With the National Credit Union Administration (NCUA) beginning 2022 by offering approval to third party cybercurrency help and some financial technology providers offering digital asset solutions, are credit unions ready to dip its toes into the cyber-asset pool?

Deloitte’s 2021 survey, conducted between March 24 and April 10, 2021, found global FSI leaders viewing cryptocurrency and its underlying blockchain technologies as a strategic priority now and in the near future, with nearly 80% of respondents saying that digital assets will be “very/somewhat important” to their respective industries in the next 24 months.

In the first of a two-part series, Finopotamus provides an overview of some recent cryptocurrency news in the financial services space. In the next article slated for February 18, 2022, we will focus on security and reputation issues and speak to fintech players seeking to help credit unions offer crypto assets to interested members.

Here is a rundown of some relevant crypto asset news for credit unions.

The NCUA Gives Crypto Its Blessing

Earlier this year, the NCUA communicated that domestic credit unions can team with third-party crypto-asset service providers to offer members access to crypto markets.

The NCUA letter to credit unions said, “Introducing members to third parties that may provide members with services related to digital assets is permissible as it: (1) is useful in carrying out an FCU (Federal Credit Union) business because it facilitates member services that allow an FCU to serve as their members’ primary financial institution; (2) is the logical outgrowth of an FCU’s business, including its role in serving as its members’ primary financial institution; and (3) involves risks similar in nature to those FCUs already assume in serving their members, including referring members to various third-party service providers of other non-deposit financial products and services.”

The NCUA also suggested that the new guidance “provides new opportunities for revenue in the digital asset marketplace” for credit unions, commenting that demand has “only continued to expand as ordinary consumers are presented with easy access to cryptocurrencies and other digital assets.” However, it also noted that credit unions need to ensure their partnership deals meet certain standards, adding that “the authority for credit unions” to “establish these relationships will depend upon the laws and regulations of their states.”

NCR Dives into Cryptocurrency and Management

Douglas Brown, NCR.

Atlanta-based enterprise technology provider NCR observed that what once was a niche market is now receiving mainstream attention, and credit unions and banks must determine when and how digital currencies will fit into their service offerings.

In June 2021, NCR and New York City-based crypto management specialist NYDIG, a bitcoin (BTC) company that is fusing high-tech custody with institutional-grade finance services, announced a partnership to allow the financial institutions NCR services to buy and sell bitcoin through NCR mobile apps, while making use of custody services provided by NYDIG.

Last August, NCR announced the acquisition of cryptocurrency software provider Liberty X. NCR President and General Manager of Digital Banking Douglas Brown explained Liberty X will provide NCR with a powerful set of cross-channel cryptocurrency capabilities that it plans to integrate within NCR’s ATMs, POS and kiosk systems. “We think it's really prime time for crypto because so many consumers now are aware of it. There is an interest in it and people want to participate.” Brown added NCR believes that the general public is going to prefer working with cryptocurrency through their credit union or bank, institutions they trust, and not have their members or customers go to third-party applications.

Genesis Looking to Help Credit Unions Enter the Space

Genesis, a New York City-based cryptocurrency brokerage for institutional investors, is also looking for different ways to work with credit unions and other traditional financial institutions interested in entering the crypto space. The company loaned a record $50 billion of assets in the fourth quarter of 2021 to borrowers including crypto funds and other financial firms.

In its market review for January 2022, a Genesis report noted “In crypto, the regulators seem to be making clarity more of a priority, DeFi (decentralized finance) is becoming even more experimental while institutional interest is growing, new smart contract blockchains have attracted significant user capital.”

Leon Marshall, Genesis.

Leon Marshall, managing director, head of institutional sales, for Genesis, said, “Credit unions have been under pressure from consumer fintechs, the household names who have been offering crypto asset services as part of their offering. I think credit unions have noticed that (and) they've taken notes and they said (to) themselves, ‘okay, what can we do to remedy this?”

Marshall added, “Credit unions are now looking to be differentiators for their members. It is important for credit unions and the members to work with a partner that is both nimble and innovative. We are confident that that is exactly what Genesis can offer.

Finastra to help FIs Integrate Cryptocurrency Services

Over the last six months the London-based financial software company Finastra, which also operates from Lake Mary, Fla., announced a number of crypto-friendly plans that could interest credit unions:

· In September, the creation of Allied Bitcoin Wallet, a new app launching on Finastra’s FusionStore. The service, created by Fort Wayne, Ind.-based Allied Payment Network in partnership with NYDIG, will enable financial institutions to offer customers and members the ability to buy, sell and hold bitcoin via a compliant, secure and turnkey platform.

· In October, the availability of Alpharetta, Ga.-based Bakkt’s digital marketplace and wallet available through Finastra’s open developer platform and app store, Bakkt, a platform that enables consumers to buy, sell, store and spend a range of digital assets, including bitcoin, will be available to credit union and community bank accountholders.

· In December, Singapore-based Liquid’s Quick Exchange (QEX) app’s accessibility through Finastra’s open developer platform and app store, QEX enables financial institutions to meet rising interest in cryptocurrency by offering services including buying, swapping and payments.

Philip Taliaferro, Finastra.

“The idea here is making it as frictionless as possible for members or customers to actually go in and access a crypto experience,” said Philip Taliaferro, head of partner and fintech ecosystem, at Finastra. He added, for credit unions Finastra provides, “a gateway that enables members to invest and participate in crypto very seamlessly, without actually being responsible as custodian for the asset.”

Fiserv Invests in and Provides Crypto Research

In June 2021, Brookfield, Wis.-based financial services technology provider Fiserv announced a partnership with NYDIG that will enable banks and credit unions to meet growing mainstream interest in bitcoin, retain and grow their customer base, and increase non-interest income opportunities. Fiserv said the integration with NYDIG will allow consumers to manage bitcoin transactions directly within their financial institution’s online and mobile banking portals.

In December 2021, Fiserv’s latest “Expectations & Experiences” consumer trends survey found interest in cryptocurrency continuing to grow, but consumers want solutions from trusted sources. While only 10% of consumers have used a third-party crypto app, more than half (61%) of Gen Z and millennials want their credit union or bank to enable them to hold cryptocurrency, according to the survey.

“Interest in cryptocurrency, and particularly bitcoin, has skyrocketed over the past several years, to the point that bitcoin investing is now a commonplace activity,” said Byron Vielehr, executive vice president, digital and data solutions, at Fiserv. “People continue to turn to financial institutions as a central place to manage their financial activity, and being able to offer this capability will help position banks and credit unions at the forefront of their customers’ financial lives.”

Idaho Central Credit Union Launches Bitcoin Services

In December 2021, Plano, Tex.-based digital banking solutions provider Alkami Technology Inc. announced the $8.3 billion Chubbuck-based Idaho Central Credit Union implemented bitcoin services through NYDIG and the Alkami Platform. ICCU's partnership with NYDIG allows its members to buy and sell bitcoin within the credit union’s mobile app and online banking platform.

“Fully integrated bitcoin services through NYDIG and the Alkami Platform take us to the next level when it comes to the member experience,” said Mark Willden, chief information officer, ICCU.

"We partnered with NYDIG to enable financial institutions to extend bitcoin options to their own users within a trusted, secure solution," said Stephen Bohanon, co-founder and chief strategy and sales officer, Alkami.

Next up on February 18, 2022, Part 2: Dealing with security; and fintechs introducing credit unions to crypto assets.

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