Investors haven’t abandoned crypto and neither should credit unions
The media stories surrounding the topic of cryptocurrency are often as volatile as the commodity itself. The sudden collapse of cryptocurrency exchange FTX and the dramatic arrest of its 30-year-old founder was one of the most followed business stories of 2022. The situation evoked comparisons to the fall of Lehman Brothers during the 2008 financial crisis. Pundits, politicians, and prognosticators across the media spectrum were adamant in their opinions that this would be the end of cryptocurrency in both theory and practice.
Fast forward to the second quarter of 2023. Bitcoin’s price rose above $30,000 in April, up 70% over the same time last year. Crypto prices overall have trended higher this year with investors responding to Federal Reserve fiscal policy, inflation falling slightly, and worries caused by some high-profile bank failures. Many of the same commentators who declared crypto had gone the way of the dodo and dinosaurs, are now giving their take on the “resilient” crypto marketplace.
Despite the FTX saga and the vast differences of opinion about cryptocurrencies, credit unions that take steps to understand the benefits and risks of crypto are better positioned for the future. Current members will appreciate the option of a new investment product. Potential future members looking to establish a relationship with a financial institution will view credit unions involved with crypto as forward thinking and therefore, more attractive.
Many financial institutions are cautious by nature and of course, always mindful of risk. However, with over half of Millennials and Generation Z already invested in crypto, an overabundance of caution could wind up closing the door on opportunities. If credit unions are willing to educate themselves about the benefits, and the risks, they will feel more comfortable with crypto and more confident in marketing it to members.
As an eye-opening first step, credit unions can easily examine their deposits and see where funds have left for the crypto exchanges. This would be a great way to gauge interest level and see tangible data regarding crypto activity at the member level.
One of the hurdles credit unions must overcome are the many myths and misconceptions surrounding cryptocurrency. Many believe that the crypto marketplace is rampant with crime, fraud, and bad actors. “Crypto Assets” a 2022 report released by the U.S. Treasury Department cited a study by the company Chainalysis that in 2021, 99% of crypto transactions actually came from lawful activities. In addition, the peer-to-peer system of computers that comprises the blockchain can speed the process of tracking and locating lost funds, while also making theft more difficult.
There are also concerns about the volatility of crypto and that it is currently unregulated. But investments of all types experience highs and lows and thoughtful, concrete regulation of crypto is one of the precious few bipartisan issues moving through the legislative process.
While the debate surrounding crypto will probably not end anytime soon, the evidence is clear that more and more credit union members are going to want to invest in crypto. If credit unions take a shortsighted view and do not consider digital assets as part of their product lineup, their members will undoubtedly find somewhere that will.
