Cryptocurrency and Digital Assets: A Growing Opportunity for Credit Unions

It seems everywhere you look these days, stories and statistics about cryptocurrency and other digital assets dominate headlines. What was once seen as a novelty medium of exchange just over a decade ago has grown into a booming industry taking the world by storm.

Since the invention of bitcoin, launched in 2009 to facilitate instant peer-to-peer payments, new forms of cryptocurrency have steadily erupted onto the market, offering numerous investment opportunities for early adopters of decentralized digital currency. In recent years, the popularity of cryptocurrency has exploded, attracting all kinds of consumers looking to build wealth.

According to a University of Chicago survey, more than 1 in 10 Americans invested in cryptocurrencies, such as bitcoin and Ethereum, in 2021. The survey also reported that the average crypto investor tends to be younger, and more diverse in terms of gender, race, and ethnicity, versus stock investors. Additionally, 35% have incomes below $60,000 per year. That’s not surprising when you consider that younger generations — Millennials and Gen Z — have been immersed in innovative technology from a very young age. In other words, they’re tech-savvy and like to be on the cutting edge.

Industries across the globe have taken notice of this major shift toward crypto, including financial services, with credit unions quickly entering the game.

As outlined in a recent regulatory report by NWCUA Vice President for Regulatory Advocacy, John Trull, the National Credit Union Association (NCUA) issued a letter to credit unions in December announcing federally chartered credit unions could partner with third-party vendors to provide crypto-related services. The letter also discussed exam expectations around due diligence, as well as policy, procedure, and agreements expectations with regard to offering cryptocurrency and digital assets to members.

Trull’s report also highlighted the need for credit unions to understand the changes taking place in today’s financial environment and how to capitalize on opportunities with cryptocurrency, as well as other digital assets.

“The Digital Asset boom is not limited to cryptocurrency. Last year Non-Fungible Token (NFT) sales using smart contract platforms, such as Ethereum, exploded with sales going from $60 million in January of 2021 to $650 million in June of 2021 to $9.6 billion in August. NFT sales from August forward averaged nearly $7 billion a month. Owners of these assets are looking for security and safekeeping,” wrote Trull.

Earlier this year, Idaho Central Credit Union became the first credit union in the country to offer bitcoin services through a partnership with NYDIG, using Alkami Technology. ICCU members will be able to buy, sell, and hold bitcoin within the mobile app and online banking platform.

ICCU Chief Information Officer, Mark Willden, said that having a strong partnership with an internet banking provider and proper vendor management is essential for a successful cryptocurrency program.

“An integrated bitcoin solution will present Idaho Central a unique opportunity to provide a cutting-edge, value-added product to online and mobile banking,” he said, also sharing that ICCU offers education and risk information about holding bitcoin shares.

Findings from a recent Visa study further underscore the importance of financial institutions meeting the crypto-related needs of their customers and members. According to the study, digital assets have reached “near-universal awareness” with 94% of adults knowing about them. Additionally59% of consumers believe that major financial institutions need to embrace cryptocurrency if it’s going to become more accessible to the public, and 39% of current crypto investors plan to switch to a financial institution that supports these assets in the next year.

Often, credit unions are the first line, and many times the last line, of support for consumers seeking financial stability and education throughout their lives, especially for underbanked or unbanked populations. As the world shifts to a more digitally focused footprint, it could become critical to keep up with the quickly evolving asset class and technology that make up digital assets, cryptocurrencies, and related financial technologies.

Posted in CU Movement, Economy.