St. Cloud Financial Credit Union builds a bridge between TradFi and DeFi

When people think about digital assets, distributed ledgers, crypto, or the new world of tokenized payments, top of mind are “the fraudsters, the start-ups, the fly-by-night FTX-type situations.” Yet, “those examples have solidified why St. Cloud Financial Credit union has decided it needs to be involved in decentralized finance!”

For many industry executives, the chaos and volatility that St. Cloud Financial Credit Unions’ Chief Lending Officer, Chase Larson, describes are the same examples cited to avoid the DeFi space entirely. For St. Cloud, building a secure bridge between traditional finance and the streaming dimension of finance, keeping the valued local institution plugged into the future of money, is simply extending the credit union mission into the future of finance, where many members are already experimenting, too often with tragic results.

Larson is not shy about sharing the credit union’s strategy. “Credit unions need to ensure that we’re helping our members protect the fruits of their labor, being a trusted partner, building a strategic path forward.” That defines the traditional credit union industry mission; St. Cloud Financial is pressing forward to reconstruct that experience in the decentralized, streaming money and assets environment.

Larson makes the case that the credit union mission can no longer be limited to the domain of US Dollars; the noble goals for cooperative financial flourishing and local, democratic management of capital now includes new, maturing forms of money like Bitcoin and myriad digital assets.

To emphasize the point Larson, adds, “the future financial system is not going to look anything like it does today.”

That first step toward a productive future of streaming money, currently scheduled to go live in late 2023, is digital vaulting. “When we started down this path, considering different strategies and partners, it was important that our members retain control of their assets and that is why we’re launching the CU Digital Asset Vault.”

“It’s about providing a real solution for our members, no different than we do with traditional safety deposit boxes.” Larson emphasized a “real solution” to draw a clear distinction between digital vaulting and the anonymous apps that “scare me for our members. Our members will understand that the third-party risk is essentially gone!” The safety deposit box analogy may seem counter intuitive at first, but control of digital assets, the keys to those assets, is ground zero for many of the horror stories in the wild west era of decentralized finance. Working with the regulators and the State of Minnesota, St. Cloud is helping end this chapter of abuse in the evolution of decentralized finance.

“Look at our society in general, the technological advancements of the last 40 or 50 years, finance is only the next evolution of those advancements. Why would we think that finance won’t go “streaming” just like everything else has?”

Skeptics might respond that much of finance is already streaming through electronic wallets and third-party exchange services. However, most financial institutions have a lot of catching up to do and a steep curve to climb when it comes to understanding the difference between electronic dollars and the appearance of real-time money movement, and the new world of streaming money and digital assets moving every second of every day faster, more securely and more affordably than the legacy, file based, daily bank-to-bank settlements. Larson is describing something fundamentally different, building a new operation for an emerging era of ‘complimentary currencies’ and providing a technical solution within the core of their business to allow their members to store/vault digital assets with the support and service of a trusted, local partner, not a mysterious third-party app that co-mingles assets and retains the keys to those assets.

“Either our members will be served by us in a safe and secure manner, or they will look for those services elsewhere. We’ve been a true fiduciary of our community and members for 93 years!” Larson explains that building a strategy for the decentralized realm of finance is simply serving credit union members consistent with the industries’ promises since the origins of the movement.

“If you think of some of the third-party providers, the bolt-on solutions, it’s an API integration, but the assets are housed outside.” Guided by Larson’s experience in the distributed ledger and decentralized finance, St. Cloud is delivering valuable, secure storage services for increasingly important sums of money represented in the form of digital asset keys/tokens. Larson explains that member-centricity, truly putting members first in the decentralized world, means something new and challenging to traditional banks and credit unions. “Thinking we can solve (the security issue) or support our community and members with a quick, bolt-on, third-party solution is short-sighted.”

In fact, core to St. Cloud Financial is an awareness that, especially in this era of emerging money storage and streaming networks, relying on outside vendors to store and process digital asset data is tantamount to outsourcing credit union operations and member relationships.

Larson continued by emphasizing St. Cloud’s efforts to create a core-centric and consumer-centric business model. “If you look at a bullseye, if you put the member at the center, a lot of companies will start at the outside and work in; Saint Cloud really wants to start at the inside and work out. Approximately one fifth of our members have responded to our surveys saying we’re either involved in digital assets, or we want to be involved in digital assets and learn more.”

In a landscape evolving at lightning speed, St. Cloud is taking measured strategic, operational, and technological steps to ensure not only a sound, and differentiated technical solution, but also a responsible regulatory and compliance-based operation and product offering. St Cloud’s member experience for digital assets is ‘at the core of their business’ which is worlds apart from many early adopters’ experiences. “And that to me, that’s the biggest value in in all of this is, this is not a get rich quick scheme,” Larson explains, “it’s about focusing on our members, putting the member first and starting with safety and then slowly walking down a path hand in hand with our regulators as the regulation continues to solidify.”

St. Cloud Financial Credit Union is excited to introduce “digital vaulting” to the market. Now, credit unions can increase their relevance and return by using their modern core to store digital asset data, building a bridge between “TradFi” to “DeFi” in a responsible, regulatorily sound, and technologically differentiated manner.

Jon Ungerland, DaLand CUSO’s CIO and an industry thought-leader on community-based finance and the implications of DeFi on the industry explains, “the conversation around digital assets and crypto banking is understandably confused and fragmented now; but those monitoring the horizon see accelerating institutional involvement in DeFi.

St. Cloud Financial remains focused on the long-term commitment to help members maintain control of their financial relationships, including in the decentralized finance space. “Pick the right partner that can help you look at operational optimization to continue serving your members in the digital future, not just bolt-on product that’s here today and gone tomorrow.”

For more information about building a bridge between TradFi and the DeFi world, contact DaLand CUSO.