After FTX, credit unions are evolving their approach to crypto | Credit Union Journal

by Arthur · February 28, 2023

From left: Glen Sarvady, managing principal at 154 Advisors, Rahm McDaniel, head of business development, platform and payments for NYDIG, Becky Reed, CEO of Lone Star Credit Union in Dallas and Elizabeth Kwok, assistant director of the Federal Trade Bureau of Consumer Protection Commission. “We decided, because we are ‘resource poor,’ that we would implement an option that helped our members and was the safest and best option we could afford,” Reed said.

With the recent collapse of the controversial cryptocurrency exchange FTX and subsequent allegations against former CEO Sam Bankman-Fried, credit union leaders are shifting their focus away from the monetary value of digital assets and toward their overall utility.

In the wake of FTX’s downfall, many credit union executives received a flood of calls from concerned members who owned digital assets and needed help transferring them to a safer environment—a majority of which were not positioned to meet those needs.

“It’s a member service opportunity that I think is more recognized now than it was this time a year ago, and custody is [similarly] a very important topic,” said Rahm McDaniel, head of banking solutions for NYDIG, a bitcoin technology and finance company in New York, in a panel discussion hosted at the Credit Union National Association’s Governmental Affairs Conference on Monday.

Institutions that choose to partner with NYDIG – such as the $2.7 billion asset Achieva Credit Union in Dunedin, Florida, and assets of $5.6 billion Visions Federal Credit Union in Endwell, New York – let members buy and sell bitcoin through a widget on their mobile banking app. This means that the credit union can facilitate the service without custody of the assets.

But for smaller credit unions that lack the necessary resources to integrate such a product, another type of collaboration can also be valuable.

Lone Star Credit Union in Dallas entered into a referral program with Delaware-based crypto exchange BankSocial early last year after member transaction data illustrated how many account holders were buying digital currencies and potentially exposing themselves to fraudulent networks.

“We decided, because we are ‘resource poor,’ that we would implement an option that helped our members and was the safest and best option we could afford,” said Becky Reed, CEO of $165 million Lone Star. .

Reed emphasized how boutique credit unions — those she categorized as $250 million in assets or less — can help meet members’ needs to manage digital assets with minimal strain on capital, time and other resources.

Experts advise credit unions not only to vet the partners who help them enter the crypto marketbut also educate members about the scope and risks of crypto products.

“Whether you’re selling a bitcoin miner, or giving people custodial or non-custodial wallets, you need to have very basic consumer protection principles in place. … [Which means] make sure you disclose all material terms and make sure what you say you’re going to give is what you’re going to give,” said Elizabeth Kwok, assistant director of the Federal Trade Commission’s Bureau of Consumer Protection.

“So if you require 24/7 access to funds, you should have 24/7 access to funds,” Kwok said.