By Ray Birch
DALLAS—One small credit union says a non-custodial wallet may be the best option for a smaller CU seeking to enter the crypto space.
The $162-million Lone Star CU is now offering its members the ability to buy, sell and hold cryptocurrency through Bank Social.
CEO Becky Reed told CUToday.info the decision to go with Bank Social, a non-custodial wallet, was based on a much lower cost of entry than with an offering from NYDIG—which a number of CUs are using—and it gives the cooperative greater flexibility for future ventures in crypto.
She also said it’s a “safer” play for members.
Reed’s insights come at a time when the cryptocurrency industry has Washington’s attention due to the failure of a growing number of crypto exchanges, including most recently the giant FTX.
“Bank Social is the company that we partnered with because they are a non-custodial crypto exchange,” said Reed. “That is a key differentiator. When you buy your crypto from Bank Social you own it day one.”
Becky Reed
And that, she said, is a big advantage for members because it can help avoid potential problems if the cryptocurrency company is a custodial exchange, meaning it is the owner of the crypto.
“That was a huge problem customers of (crypto platform) Voyager, for example, that went into bankruptcy,” explained Reed. “They froze everybody’s crypto wallets. So, if you held your crypto in a wallet with Voyager, you did not have access to your crypto. If you look at the fine print, (custodial wallets) own your crypto. Bank Social is a non-custodial exchange, which means you can put your crypto in whatever wallet you choose and you get your private keys the day you buy it. That is a key differentiator.”
More Choices
Cryptocurrency expert Lou Grilli said he believes Lone Star is the first credit union to partner with a non-custodial cryptocurrency exchange.
“To the best of my knowledge, Lone Star is the only credit union getting into the crypto services space with a partner other than NYDIG,” said Grilli, senior innovation strategist at PSCU. “NYDIG, too, is currently limited in their offering—bitcoin only, at least for now. And, the CU does not get an option of custodians with the NYDIG solution. What Lonestar is doing with Bank Social will provide members and the credit union with more choices, which I think will help the credit union in the future in its involvement with crypto.”
Reed said her credit union also chose Bank Social because it offers 24/7 live chat and customer support.
“That is another differentiator from some of the other exchanges we considered,” she said. “Bank Social also sells lots of different coins, not just bitcoin. It really came down to the fact we felt very strongly that our credit union members should have access to what we feel is a safer cryptocurrency platform that is a very compliant exchange. Bank Social is a registered money services businesses and they comply with anti-money laundering and KYC rules. When they onboard a customer, they go through KYC process.”
The Deal-Closer
But what really closed the deal for the $165-million Lone Star, perhaps the smallest credit union to enter the crypto space to date, is the price of entry, explained Reed.
“Bank Social is a very quick, easy and inexpensive way for a credit union to play in the crypto space,” said Reed, noting that NYDIG integrates with the CU’s digital banking solution and the member views its crypto wallet through the CU’s own banking platform. That takes time, often months, and comes at a price well above the $1,500 one-time charge from Bank Social, she said.
“Bank Social is a referral from the credit union, much like the way credit unions partner with investment advisors,” she told CUToday.info.
Reed said she believes promoting the service on the credit union’s website and in branches and then making the referral drives the same kind of loyalty as having a crypto platform integrated within the CU’s digital banking system.
“You go to our website, you click on the icon that says buy your crypto, and it takes you through the Bank Social offering process,” Reed explained.
High Open Rate
Like many other credit unions that have begun offering members crypto services, Lone Star saw through daily transactions showing members were getting involved with cryptocurrency, and then decided to work with Bank Social.
“We identified members who were regularly buying crypto and sent them emails,” said Reed. “That email had a 35% open rate and a 26% click-through rate, which is pretty high and a clear indicator that our members are wanting to have a trusted intermediary to help them purchase their crypto. In my opinion, this is a very good, inexpensive way for a small credit union to get involved in cryptocurrency.”