True to its name, First Tech Federal Credit Union wants to be on the cutting edge of new tech trends, even if it means offering cryptocurrency services before there's mainstream demand.
"If and when the markets evolve to a point where consumers can actually pay their bills with digital currency, we'll be ahead of the curve," said Greg Mitchell, president and chief executive of the San Jose credit union, which has $15.9 billion of assets.
First Tech is planning to roll out an option for members to buy and hold Bitcoin in a digital wallet through a mobile app. The credit union would inform members of the risks of crypto investing, including the fact that crypto assets won't count as funds insured by the Federal Deposit Insurance Corp. or the National Credit Union Administration.
Several credit unions have already stepped into the fray this year, following regulator approval for third-party crypto servicing, despite the volatility in many currencies' valuations that
Mitchell acknowledged that market trends have been disruptive, but that hasn't cooled demand from consumers.
"There's a clear desire, particularly on the part of a younger demographic, to be able to hold a reliable cryptocurrency and a desire to be able to use that to purchase goods and services in the future," he said.
And that desire is especially strong among credit union members.
Credit unions and crypto
Thirty-nine percent of credit union members own crypto, according to
This affinity for crypto could stem from the same desires that motivate people to choose a credit union over a bank. African American and Hispanic consumers, who had higher crypto ownership rates in the report, are using cryptocurrencies as an alternative to traditional banking or payment services, said Ligia Vado, senior economist at CUNA.
Hispanic voters led in ownership at 48%, compared with 36% of Black respondents, 25% of Asian respondents, and only 22% of white respondents saying they owned any crypto. "When it comes to racial disparities in adoption of cryptos, one of the main reasons is that African Americans and Hispanics tend to have less trust in mainstream finances," Vado said.
After extending its deadline for request for comment on cryptocurrency by a month, the National Credit Union Administration heard from credit unions and other organizations that want clarity on the boundaries the agency plans to set.
Among Hispanic Americans, cryptocurrency has already gained wider adoption due to government-sponsored growth of those markets in Latin American countries, Vado said. In many cases, governments are promoting the use of stablecoins, which attempt to tie their valuations to a government-issued currency to avoid the volatility that Bitcoin and other cryptocurrencies experience.
She cited the example of Argentina, where "the stablecoin market grew sixfold in 2021. And they use cryptos like stablecoins, in particular to hedge against inflation and devaluation of the national currency," Vado said. Additionally, El Salvador
For migrant workers in America, crypto also makes it easier and cheaper to send money across borders to family members in their countries of origin, Vado said.
Buddy system
Credit unions don't yet have a common approach to crypto, but "some credit unions are looking at these partnerships as strategies to support member acquisition" by offering the option to try out crypto through a vetted broker-dealer partner, according to Andrew Morris, senior counsel for research and policy at the National Association of Federally-Insured Credit Unions.
Since the National Credit Union Administration gave permission in
The National Credit Union Administration has given its first guidance on handling Bitcoin and other digital assets in an effort to encourage credit unions to work with fintechs to offer new services.
Lou Grilli, senior innovation strategist at the credit union service organization PSCU, says every week he's in meetings with credit unions' board members or executive teams to discuss adding some kind of crypto services.
The interest is coming from across the U.S., though only a few are live today with crypto services, Grilli said.
"You can count on two hands of credit unions that are actively doing this, but many, many more are in the queue," Grilli said.
Visions Federal Credit Union in Endwell, New York, launched a product in January to
However, it was a
Member response to the Bitcoin product has been mixed so far, Keller said. There's been "steady growth" of member interest in it since the launch, but nothing dramatic, he said.
But that's to be expected.
"It's more about making sure that we stay in line with where financial services in general were headed," and building trust as a resource for the crypto curious, Keller said.
And even the early adopters are pacing themselves. At First Tech, the credit union is planning to support only the most well-known cryptocurrencies.
"We're not going to be like a Coinbase, giving you Dogecoin and all sorts of other things that may have holes in it, as it relates to that trust or security," Mitchell said, referring to the DOGE cryptocurrency token which, despite its popularity, was originally minted as a joke.
If credit unions plan to limit their crypto services, they must offer something that the better-known crypto exchanges do not. And as nonprofits, they can offer lower fees, PSCU's Grilli said. Other features they could offer include a credit union-branded crypto wallet, rewards, and factoring crypto holdings as assets into loan assessments, Grilli said.
Credit unions' outreach seems to be paying off.
"Before the start of the crypto winter, the vast majority of money was flowing out" of credit unions when members wanted to try crypto, Grilli said, observing that it was "not that unusual" to see a quarter of a million dollars a month flowing out of an average-sized credit union to the top 10 or 20 crypto exchanges. "Now we're starting to see some money flow back from the exchanges back to credit unions."
Credit unions must also provide some education to members on the risks they take when engaging with cryptocurrencies, even at a regulated financial institution, Grilli said. This education can also help credit unions differentiate their services from crypto exchanges, he said.
"It still is so new that we're just seeing these things developing, like where are the hard and fast resources could you go to, who is the gold standard for education?" Grilli said. "We're not quite there yet."
