The Emergence of Cryptocurrency at Credit Unions

Written by Devon Wilson

cryptocurrency at credit unions

 

There’s big news in the cryptocurrency and credit union industries. In the last several months, new developments in policy have made it so that federally insured credit unions are now able to partner with other fintech and third-party companies to provide digital asset services. That means cryptocurrency might be headed for your credit union if it’s not there already.

Current Cryptocurrency Trends

Cryptocurrency, in its most simple form, is very different than traditional forms of currency. It is a digital asset that can be transferred without the assistance of a financial institution. The appeal stems from its almost unlimited availability. Unlike certain forms of traditional currency – credit and debit cards, cash, checks, and the like – access to cryptocurrency only requires access to the Internet.

And since Internet access continues to stretch to even the farthest reaches of our planet, cryptocurrency is growing right along with it.

It also creates opportunities for those who are unbanked or underbanked. You don’t have to have or create a relationship with a financial institution to trade in crypto.

But many savvy consumers who have invested cash and other assets into the cryptocurrency of their choice wish they could do their crypto-based business through their primary financial institutions.

And other companies are taking notice of these trends and jumping on the trend. Businesses of such caliber as Microsoft, PayPal, Shopify, and Home Depot are now accepting certain forms of cryptocurrency, as are credit card giants like Visa.

By opening credit unions up to the world of uninsured digital assets, they can create a new revenue stream that continues to captivate more and more of their members.

The Path to Cryptocurrency at Credit Unions

Many big banks have been offering cryptocurrency-related services for well over a year. It was only a matter of time before smaller institutions and credit unions were able to take advantage of these assets.

The NCUA stated that federally insured credit unions can facilitate “member relationships with third parties that allow FICU members to buy, sell, and hold various uninsured digital assets with the third-party provider outside of the FICU.”

Over 100 million people are credit union members, and many of them are already investing in cryptocurrency. But what does that mean for your credit union?

Right now, more than 10,000 different types of cryptocurrencies exist in the world. And that means your credit union will have some decisions to make.

One big risk associated with uninsured digital assets is the volatility associated with them. According to CUInsight, Bitcoin – the most recognizable form of cryptocurrency – jumped to more than $60,000 in April, but its value fell by half before the end of May. This risk provides a great opportunity, though. The institutions dealing in cryptocurrency right now are doing business in an unregulated industry.

And that means tons of startups are handling these important assets with little or no experience in risk management. While cryptocurrency is often presented as a safe asset and less vulnerable to fraud than other currencies, this isn’t necessarily true. Access to your digital assets is granted by way of a digital key. But if that key is lost or stolen, your entire crypto portfolio can be taken from you in one fell swoop.

Credit unions have been operating under regulatory and compliance guidelines for decades, and risk management is the name of the game in this field.

While it’s important to weigh the risks and rewards associated with creating a cryptocurrency program at your credit union, it’s a sort of “get on the train or you’ll miss it” type of situation. People are searching for crypto-friendly banks and financial institutions. That high demand must be taken into account when you are weighing your options for future financial offerings.

Your CU Options

If you and your credit union believe cryptocurrency is a necessary offering in the coming years, there are several options that can help streamline the process and mitigate risk.

You can partner with a third-party provider. In this situation, your credit union acts as a proxy or middle man: the currency is run through the external provider, but can be viewed through your credit union accounts or via a related mobile app.

You could also provide crypto custody services. These include things like safekeeping, analytics, asset servicing, lending, pricing and valuation, trading, payments, and settlements and collateral, says CUInsight.

And, just like with any other credit union offering, you’ll need a resident expert. Whether that means you add a cryptocurrency-savvy employee to your staff to help field questions and give sound financial advice, or you feature an out-of-house expert and partner with their services, having a face to put with the cryptocurrency movement at your CU can help tremendously.

Investing in credit union-based cryptocurrency services is also a great way to increase your brand reputation and to break the mold that has held credit unions back for years: the belief that credit union technology is outdated or slow to evolve.

By situating your credit union at the forefront of digital banking transformation, you can draw in new crowds and members.

IMSI Has Comprehensive CU Solutions

Technology and innovation are what IMSI does best. We are here to help you close the gap between tech-savvy big banks and local, community-based credit unions.

IMSI wants to partner with you to bring your team – and ultimately, your members – the best credit union experience from top to bottom. That’s why we offer elegant, member-facing web solutions like Make a Statement, Online Courtesy Pay, Online Self Service Forms, and Trial Balance.

Check out our website for more information, or contact us today if you have questions.

Recent Posts …

2024 Industry Forecast: Expert Insights on the Future of Credit Unions

2024 Industry Forecast: Expert Insights on the Future of Credit Unions

As we step into a new era of technological advancements and innovation, the financial industry, particularly credit unions, is poised for significant transformations. To gain insights, we turn to the predictions of fintech and credit union experts who have been closely monitoring the industry’s evolution. Let’s explore the key trends and advancements that are likely to shape the future of credit unions in the year 2024.

read more
Preventing Delinquencies: Credit Union Strategies & Small Business Resilience

Preventing Delinquencies: Credit Union Strategies & Small Business Resilience

In the current economic climate, small businesses are crucial, employing nearly half of the workforce. Yet, they face significant challenges, particularly in cash flow management, which can ripple through to credit union members, impacting their financial health. For credit unions, this presents an opportunity to strengthen their commitment to members by adopting strategies to avert delinquencies and offer support in these unpredictable times. Explore credit union strategies and insights on small business resilience with the IMS Integration team.

read more