Cashing in on another banking crisis
What local financial institutions can do to differentiate and innovate, 15 years after 2008
During the Great Recession of 2008, a few thousand people dared to “Occupy Wallstreet,” protesting the abuses of power and the devastating costs of greed which so often follow in the wake of banking ‘booms.’ Now, 15 years later, the banking landscape has been stealthily reshaped by clever confluences of technology and strategy, which silently emerged from the 2008 crisis.
Unlike 2008, “banking” now functions broadly across two, parallel systems: one centralized and highly regulated (with decidedly mixed results); the other, the technological upstart, thoroughly decentralized, and paradoxically, operating through a homogeneous, immutable ledger.
While the world faces down another global banking contagion, in the US alone, approximately 41 million have ‘opted-out’ of the cyclical insanity of big-banks and hyper-centralized monetary policies. Thus far in this crisis, the big banks and central bankers have shown their ‘corrective’ plans to be different than last time – overtly preferencing large banks and frequently mentioning CBDCs as a path forward and out of this crisis.
Let’s be clear about CBDCs. CBDC will remain a centrally controlled currency with most of the encumbrances that have doomed the dollar to its recent inflationary surge. Beyond that, a CBDC will provide monetary policy makers dramatically new tools to manage consumer behavior. Rather than pushing a string as monetary policy has long been analogized, the control of “programmable money” is like wielding a stick. Negative interest rates, expiring balances, privacy questions, potential connection of money/wealth to social and political agendas, these are just a few of the possible ‘benefits’ of a bureaucratically controlled digital dollar.
So, what’s the best ‘play’ for community institutions in the middle of this latest banking crisis? If the industry senses a fork in the road where one path means exclusion from a hyper-centralized big-banking system and the other means facing the unfamiliarity of private cryptocurrencies, perhaps a sensible middle path can be charted. Local banking leaders could take note of Bitcoin’s performance during recent banking scare – up 40% since news broke about SVB. Apparently, savvy individuals value safe storehouses for the fruits of their labor, independent of the abuses of the centralized systems which they clearly (still) distrust!
Unlike 2008, when local banks were forced to take the ride with Wall Street and central banks, local banking leaders now face a generational, strategic decision. Will they stand by while consumers move more wealth to purely digital platforms (like the Bitcoin network); or will your credit union refocus the principles and values of the movement to the digital divide, educating, stewarding, and safeguarding member assets? These values – decentralized power, local control, personal storage, effective management of wealth, and democratic control of capital, are coded into Bitcoin’s technology and within your institutions’ DNA.
I’m often asked by boards and executives of community banking institutions to explain “why is Bitcoin worth anything?” I’ve started responding, “why is the credit union movement worth anything; why does a credit union have value?” If you can answer the latter, you’ll recognize this historic opportunity and the critical needs that your communities and members face today.
As more local and regional financial institutions falter, and as JPM and Jamie Dimon continue to gobble up deposits and assets, assembling a dominating market share, leaders of local financial cooperatives could find a strategic advantage in consumer and corporate flight to decentralized, private wealth. While a few coronated banks get even ‘too bigger to fail,’ and the industry turns again to more rounds of money printing and liquidity injection – as well as a CBDC for ‘faster’ and ‘better’ settlement and liquidity management – the industry which arose as an alternative to big bank financial shenanigans may once again find itself in a position to advocate for next generation locally stored, democratically governed, cooperatively processed capital, including digital capital!
If this sounds daunting, you are reading it correctly. Millions of consumers are struggling in an environment which has produced an excess of 20% inflation over the past three years. Food shortages, paralyzing property taxes, and ever-decreasing buying power of the ‘all-powerful’ USD, have forced millions to take unreasonable risks searching for a better way. The good news? If you’re already on a modern core and are willing to collaborate with innovators, you can remain the guiding light of financial resilience, helping your communities thrive in the future of finance. The choice is yours to make.
We’re here to educate, cooperate, and keep you plugged into the next generation of cooperative digital data-money. Visit us at www.dalandcuso.com.