By W.B. King
There hasn’t been a topic that has captured the credit union industry’s attention in recent memory more than cryptocurrency, so says PSCU’s Vice President of Innovation and Design Scott Young. But this isn’t simply Young’s view — he has the data to back it up.
“PSCU’s most recent Eye on Payments study revealed an overwhelming interest in cryptocurrency from credit union members — one in three overall respondents reported they would be interested in learning more,” Young told Finopotamus.
This member curiosity, in part, led to PSCU launching a dedicated cryptocurrency microsite specifically curated for credit unions. The Tampa, Fla.-based payments CUSO supports more than 1,900 financial institutions, which represent more than seven billion transactions annually.
Announced at PSCU’s Member Forum 2022, which took place in Las Vegas in late April, the microsite will “serve as a continuously updated hub for information and educational resources on all things related to digital assets,” explained Young.
Among reasons for the growing interest in cryptocurrency is market growth, Young added.
“On any given day, the market cap of cryptocurrency, which is still fairly new, is somewhere between $2 to $3 trillion. It took fintechs about seven to eight years and credit unions more than 100 years to reach these levels,” he said.
The microsite, which can be accessed by any interested party, complements PSCU’s previous efforts to educate credit unions on digital assets. This approach has included publishing white papers and blogs on related topics.
“We felt there was a need to centralize it all for easy access, which is why we pulled it all together into a microsite that now serves as a one-stop-shop for cryptocurrency education. While anyone can access the website, it is specifically targeted toward credit unions,” Young continued. “On it, you can access all of the content we have already published to learn more about cryptocurrency, with new information slated to be added as it is available.”
NCUA Support Furthers Crypto Movement
In late December 2021, the National Credit Union Administration (NCUA) sent a guidance letter to federally insured credit unions regarding its stance – a change of course – on the issue.
“The NCUA is now clarifying that the NCUA does not prohibit FICUs from partnering with third-party providers of digital asset services that leverage evolving technologies. This includes facilitating 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,” NCUA Chairman Todd Harper noted.
“FICUs should conduct adequate due diligence and ensure compliance with all applicable laws and regulations when engaging in any such activity to ensure safety and soundness; comply with consumer financial protection, investor protection, and anti-money laundering/terrorism finance laws; and protect cybersecurity,” Harper added.
Until this pivotal announcement, Young said the credit union industry “had been holding their collective breath.” NCUA’s statement pumped oxygen back into the room.
“The December announcement was a conditional green light for credit unions to start playing in the cryptocurrency movement, if they so choose,” he said.
According to recent PSCU data, considerable funds are moving from credit union accounts to cryptocurrency exchanges. “And it’s a large amount of money, so we know that consumers are already getting involved in digital assets,” said Young.
For many credit unions and respective members, Young said inquiries, such as “What can we do [with crypto]” and “What are the associated risks” continue to be FAQs.
“That is why it is more important than ever to have a living microsite like this with the latest information to help educate credit unions above and beyond the conversations we are already having, and the actions members are already taking,” he said.
Aside from general queries about stablecoins, non-fungible tokens (NFTs) and how these digital assets work with blockchains, Young said there are many other questions to be answered, including: Will cryptocurrency remain mostly an investment and will it ever go mainstream for purchasing at the point-of-sale?
“Right now, by-and-large, cryptocurrency is used as an investment tool, but with how rapidly it has evolved over the last decade, time will tell what it will or will not become in the future,” he said.
The $64,000 Crypto Question: How Will it be Regulated?
In an effort to ensure the responsible development of digital assets, including cryptocurrencies, the Biden Administration released an executive order in early March 2022, sending a message that regulation is top of mind.
“The rise in digital assets creates an opportunity to reinforce American leadership in the global financial system and at the technological frontier, but also has substantial implications for consumer protection, financial stability, national security, and climate risk,” the order noted.
“The United States must maintain technological leadership in this rapidly growing space, supporting innovation while mitigating the risks for consumers, businesses, the broader financial system, and the climate,” the order continued. “And, it must play a leading role in international engagement and global governance of digital assets consistent with democratic values and U.S. global competitiveness.”
Young explained that part of the executive order requires the U.S. Department of the Treasury to respond to President Biden in 180 days regarding what federal legislation and regulation “might make sense.” There has also been movement in other government bodies.
“In April, Senator Pat Toomey, (R-Pa.), introduced a stablecoin bill, the goal of which is to establish a framework for stablecoin, remove some of the volatility and risk and add controls for digital assets. With all of this in mind, we could very well see additional legislation very soon,” Young noted. “In New York, residents and businesses operating in the state have access to a BitLicense, which provides consumers a bit more assurance that the licensed cryptocurrency exchange may be more reputable.”
PSCU’s microsite, explained Young, will have up-to-date information like the aforementioned as well as downloadable educational videos, which can be shared with credit union boards, staff and members.
“PSCU consistently shares a regular cadence of educational content about cryptocurrency, and it is updated in real-time as new resources become available and as any timely and relevant updates occur – both from PSCU, media outlets and industry experts, among other sources,” he said.
Educate to Prevent Scams
Cryptocurrency education, Young contended, is of critical importance due to the “sheer number of scams and fraudulent activity” currently associated with digital assets.
“Last year alone, American consumers lost millions in scams that offered exchanges, which only existed for one to two days before closing up shop and leaving with investors’ money,” he said. “As such, credit unions should first and foremost educate their members – whether they’re playing today or just crypto-curious – to make sure they are not a victim of the next fraudulent scheme.”
Going beyond education, Young encourages credit unions to investigate which exchanges members are participating in by “mining ACH and debit data to track deposits” from member credit union accounts to exchanges.
“They [credit unions] should also be talking to their members. Every credit union has a great relationship with its members, so lean into that strength and find out what your members are saying,” he added. “Take a pulse of your members and find out where they stand on these digital assets to best chart your course of action.”
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