Credit Unions and Cryptocurrency: Can they Co-Exist? They Need To!

In late 2021, the National Credit Union Administration (NCUA) confirmed the right of credit unions “to establish relationships with third-party providers that offer digital asset services to the FICUs’ members” (an FICU is a federally insured credit union).

That announcement meant that credit unions could begin the process of connecting their members to various cryptocurrency providers. And administration vice chair, Kyle Hauptman went so far as to say, “I don’t want credit unions to get the way of Blockbuster Video because we, the regulators, prevented innovation.”

You probably need to be of a certain “vintage” to understand that reference. Let’s say that we can talk about “Netflix and chill” while “Blockbuster and chill” would just generate confused stares.

For that matter, is “Netflix and chill” still a thing? Probably not – post-COVID and all…

And I don’t know about you, but I can still remember a time when Blockbuster had the chance to buy Netflix.

Now look!

Sometimes, the opportunity we don’t take is the one we have to take. Hindsight is 20/20.

Is the same true for cryptocurrency in the years to come?

Bitcoin – It all started in the aftermath of the crisis of 2008

Cryptocurrency is probably a term many of our members haven’t even heard of. More people will probably recognize Bitcoin, even though they would admit they don’t understand it.

Bitcoin is where it all started.

Bitcoin began as an attempt by financial rebels to develop a method of exchanging money without banks, credit cards, or other major financial institutions. So, for people to consider it within the established banking construct doesn’t fit its earliest roots.

But it does fit within a credit union ethos. One of the reasons some members join a credit union is to avoid regular banks. Cryptocurrency was set up to do just that. And it still largely does.

But at the same time, bitcoin and its cryptocurrency offspring are entering the mainstream. Those Wild West days are gone.

Cryptocurrency – It’s all happening so fast

Let’s put this all into perspective. Just over a decade ago, the first recorded price (July 17, 2010) for Bitcoin was $.09. Nine cents! And that was a jump from a price well below 1 cent per coin.

Fast forward to the present. On November 7, 2021, Bitcoin hit its highest price ever – $67.549.14. However, by the time you read this, the price could be anywhere. And that’s pretty much the only thing many of us know about it. Prices aren’t stable – hold on to your hat.

To give this some perspective, if you had one dollar in Bitcoin back in July 2010, those same eleven or so coins would now be worth three-quarters of a million dollars.

Sheesh!!!

On the cusp of mainstream acceptability?

Most of the stories we see about Bitcoin, Ethereum, Dogecoin, and the endless stream of other digital currencies are about the crazy Wild West status of the technology/marketplace.

These digital coins have grown exponentially since the start of Bitcoin in the aftermath of the banking crisis of 2008.

We hear stories about wild fluctuations in pricing and read about their usage in illegal financial transactions. This is because of its relatively new status and its effort to ensure anonymity.

But many of its proponents press the point that these are growing pains that will grow less relevant as the market settles and stabilizes. And most analysts think that’s where we’re at.

I don’t know about you, but I can still remember a time when Blockbuster had the chance to buy Netflix. Look where that took us. I also remember a time when Amazon was a new site you could go to for books you couldn’t buy anywhere else – that’s it.

Now look!

Don’t get left behind

Recent polls show that Americans are willing to consider cryptocurrency (read Bitcoin) if it is handled through a financial institution they trust, like their bank or credit union. This fits exactly with the decision by the NCUA. In the weeks and years to come, it is going to become imperative for mainstream banking institutions like banks and credit unions to get on board.

As Bitcoin grows in importance and presence, it is becoming more mainstream. Many think this is inevitable. Others miss the day when it was truly alternative.

It’s growing every day

Almost one in six Americans already have a cryptocurrency account. At this point, two-thirds of the world’s cryptocurrency is in Bitcoin. And even though that share is dropping as other currencies are introduced, there’s no reason to think it won’t be the biggest player for years to come.

As the currency that started it all and the one that still rules the roost, Bitcoin dominates our conversation about the whole idea of cryptocurrency. To deal with this, the New York Times has created two versions of the word. Bitcoin (with a capital “B”) refers to the digital currency or coin, while bitcoin (with a lowercase “b”) refers to the underlying technology. The word is ubiquitous in our mind’s eye. Sort of like Kleenex versus facial tissue. Or Coke/Pepsi instead of cola.

Cryptocurrency offers CU members plenty of options

From its inception, bitcoin (Bitcoin) was a currency without borders.

Many of its proponents point to its ability to serve the unbanked and the poorly banked. I have also written about efforts to make the postal service in both the United States and Canada a banking provider of last resort in settings where it was not profitable or practical to set up a full-service bank branch or even credit union outlet.

Now, extend that reach beyond the urban and rural banking deserts of North America and compare it to the needs of Africa or South America.

An example of this is the recent announcement by the government of El Salvador that they are going to use Bitcoin as the country’s official currency. They even went so far as to establish facilities to “mine” Bitcoin transactions – a concept worthy of another column.

Another interesting option that caught my attention was the process of sending money overseas – a need for many immigrants in Canada and the United States.

Using a service like Western Union used to be one of the few ways to send money around the globe. And that meant users were forced to pay high fees and deal with elaborate requirements and infrastructure. Cryptocurrency allows us to bypass all of that.

Imagine the ability to give some of our most vulnerable the power to share among themselves. Is there anything closer to the credit union ethos than that?