Dive Brief:
- Federally insured credit unions can now partner with third parties to provide digital asset services, National Credit Union Administration (NCUA) Chairman Todd Harper wrote last month in a letter.
- The letter offers long-awaited assurance for credit unions looking to allow their members to buy, sell and hold digital assets. The NCUA will treat such partnerships the same as all other third-party relationships, Harper wrote.
- The announcement illustrates traditional financial institutions' gradual embrace of digital assets.
Dive Insight:
The letter came at the end of a year in which the U.S.'s largest banks, one by one, offered crypto services in one form or another. It was only a matter of time before smaller institutions would seek paths to do the same.
“The NCUA does not prohibit [federally insured credit unions] from partnering with third-party providers of digital asset services that leverage evolving technologies,” Harper wrote in the letter. “This includes facilitating member relationships with third parties that allow FICU members to buy, sell and hold various uninsured digital assets with the third-party provider outside of the FICU.”
The letter offers clarity to crypto-curious credit unions, such as Endicott, New York-based Visions Federal Credit Union, which partnered with Bitcoin servicer NYDIG in October, American Banker reported.
Idaho's largest credit union, Idaho Central, partnered with NYDIG last month to integrate Bitcoin services into its digital platform. NYDIG acts as a custodian, so credit union members are unable to take the assets into self-custody.
NYDIG raised $1 billion in its latest funding round in December, according to Bloomberg.
Visa also unveiled new cryptocurrency advisory services last month. About 40% of consumers who own cryptocurrency would be willing to switch banks to find better crypto offerings, according to a recent study by the payments network.
“Credit unions have been watching endless outflows of cash to crypto exchanges, and many people would rather use their primary financial institution for their first foray into crypto investing,” Kyle Hauptman, the NCUA's vice chair, told CoinDesk. “[The] guidance helps both concerns and gives a new revenue stream to credit unions [that] want to try it out. Financial services has always been ‘adapt or die’ and I don’t want credit unions to go the way of Blockbuster Video because we, the regulators, prevented innovation.”
Among big banks, BNY Mellon said last February it would develop a client-facing prototype for a multi-asset digital custody and administration platform. That spurred several other systemically important financial institutions to quickly roll out their own offerings.
Goldman Sachs relaunched its crypto trading desk in March, the same month Morgan Stanley told its financial advisers it is letting its wealth-management clients access three investment funds that enable ownership of Bitcoin.
Citi and State Street debuted digital-assets units in June.
Wells Fargo, meanwhile, said in May it planned to launch its cryptocurrency investment platform for qualified investors by mid-June.
And Bank of America in July created a team to research cryptocurrencies and technology related to digital currencies.
By October, regional banks got into the game, with U.S. Bank launching crypto custody service.
