Is Crypto the Credit Union Killer?
Updated: Oct 3, 2019
Originally Published in CU Insight
By John San Filippo
Blockchain and crypto and Bitcoin – oh, my! Faced with the reality of the cryptocurrency revolution, a lot of credit unions are acting like Dorothy and her friends tiptoeing through the forest, fearful of what lies around every corner. What’s a poor credit union to do?
Let’s start with this: What shouldn’t a credit union do? The answer is simple. Nothing. Credit unions should definitely not do nothing. If your credit union is taking the ever-popular “wait and see” approach to blockchain and cryptocurrency, you’re going to see the crypto movement blow right past you as your credit union is vanquished to the Island of Irrelevant Financial Institutions. Your only consolation will be that you’ll probably see a lot of your friends there.
Ok, then let’s buy a product with blockchain or public ledger in the name. That’ll fix things, right? Um, negative Ghost Rider. This approach tends to assume that blockchain is just a new technology toolset that you can use to do the same old things. Maybe you can do them a little better with a blockchain solution, but where’s the real innovation?
The problem isn’t that banks and non-FIs are using blockchain and credit unions aren’t. Who cares? Your credit union needs to be concerned with the fact that your members – remember them? – are buying cryptocurrency. And they’re buying that cryptocurrency using actual US dollars. Where do those dollars come from? Your credit union, of course.
Let’s be clear on that. In the current environment, cryptocurrency takes money out of your credit union, possibly never to return again. And every dollar that’s pulled from your credit union also erodes member loyalty just a smidgeon.
Where does that money go when it leaves? Some members may choose to be custodians of their own digital assets; others may park those assets with an exchange. Both of these options come with serious risks, but what’s a poor cryptocurrency investor to do?
Hmm. Maybe credit unions could solve that problem. Maybe they could take on a custodial role that prevents do-it-yourself screw-ups and also avoids the wild west hacking that exchanges have fallen victim to. Wouldn’t that be cool if credit unions could remain relevant in the crypto age by doing what they do best – protecting their members’ assets?
Maybe I’m on to something. What do you think?