By Ray Birch
DALLAS–A company with which many credit unions partnered in order to offer cryptocurrency services to members is exiting the CU space and backing out of agreements, requiring members to sell their crypto at the current price, which for some may be at a loss.
That company, NYDIG—which is an abbreviation for New York Digital Investment Group, LLC—was the partner many CUs and CU organizations selected as they sought to provide crypto services, especially as data showed members were withdrawing funds to purchase cryptocurrencies from other providers.
Its website continues to feature a banner reading, “Trusted provider of bitcoin infrastructure and institutional financial services.”
NYDIG, which used the tagline “Bitcoin for All,” offers a custodial crypto wallet, which is a wallet in which the private keys are held by a third party.
As a result of NYDIG’s exit, the situation may have helped tilt the CU custodial/non-custodial wallet debate in favor of the latter, as with a non-custodial wallet individuals own their own crypto and keys.
Among those partnering with the company were UNIFY Financial Credit Union, Five Star Credit Union, Idaho Central, and Co-op Financial Solutions. Other CUs that partnered with NYDIG include Achieva CU, Stanford FCU, Visions FCU, and Southland Credit Union.
In nearly all cases, the credit unions simply allowed members to buy and sell crypto through the solutions and did not hold the assets, instead collecting a fee on the transactions.
One CU’s Message to Members
CUToday.info reached out to Florida-based Achieva Credit Union for comment, and the credit union forwarded the letter it sent to its members who had crypto holdings with NYDIG. That letter reads, in part:
“It has been exciting working with Achieva Credit Union on the launch of the bitcoin service. We greatly appreciate your participation. However, NYDIG has decided to discontinue offering the bitcoin service and your NYDIG bitcoin account is being closed as a result.
“Purchases are no longer enabled on your account. You have 60 days to sell your bitcoin before we close your account. If you do not sell your bitcoin by Sept. 28, 2023, NYDIG will sell the bitcoin in your account for you at the CME CF Bitcoin Reference Rate as of 4 pm London time on Sept. 29, 2023. Proceeds from the sale of bitcoin will be transferred to your Achieva account within five days after the sale of your bitcoin. NYDIG will not charge you any transaction fees for these sales.
“If you do not have a bitcoin balance, we will be closing your account and no further action is required on your part. You will not be able to initiate any bitcoin purchases while your account is being closed…
“Thank you for being a customer of NYDIG and we apologize for any inconvenience this decision may have caused….”
Statement on Website
California-based UNIFY Financial declined to comment following a CUToday.info request for details on the matter. On its website, UNIFY Financial has a statement that reads in part:
“NYDIG, the company that provides bitcoin service through UNIFY’s eBanking platform, has decided to discontinue this service. If you have a bitcoin account, please refer to the information below about actions you may need to take.”
The site included information similar to that of Achieva Credit Union regarding sales of bitcoin.
“To sell your bitcoin, please log into eBanking, click on the bitcoin tile, and choose the ‘Sell’ option,” UNIFY told its members. “If you do not have a balance in your NYDIG bitcoin account, your account will be automatically closed.”
By press time NYDIG did not respond to CUToday.info’s request for comment.
Growing Interest
But while NYDIG drew the initial interest, it has been Bank Social, which offers a non-custodial wallet, attracting growing interest among cooperatives.
Bank Social President and CEO John Wingate told CUToday.info that in the wake of NYDIG’s exit from the market credit union interest in a non-custodial wallet has further accelerated. He said his company is in discussions with several credit unions that were working with NYDIG.
As CUToday.info reported, Dallas-based Lone Star CU was the first cooperative to partner with Bank Social.
John Wingate
‘They Did a Forced Sale’
“At the high level, NYDIG pulled out of the credit union space. We're self-custody. We believe the person should own their crypto,” Wingate said. “NYDIG, now, has forced everybody to sell their crypto—the bitcoin. They did a forced sale—nobody could take their crypto with them. Some people lost because they bought in at a higher point. I heard a number of members are very upset about this.”
“There were a number of people who were buying crypto through their credit union and kind of experimenting. And they thought buying through their credit union was a safe solution. Since the credit union was involved, they felt the purchase was somewhat secure,” explained Wingate.
Potentially Negative Fallout
Wingate suggested NYDIG’s decision to exit the market could reflect negatively on the credit unions with which the platform has partnered, perhaps reducing members’ trust with the organization. Wingate said it’s possible NYDIG pulled out of credit unions and forced the sale of members’ bitcoin holdings to avoid a liquidity crisis, and that it’s also possible now that NYDIG is just focusing on larger crypto investors.
CUToday.info has been unable to confirm the validity of that view.
In a previous report CUToday.info polled credit unions that partnered with NYDIG about any possible concerns they may have had for the crypto platform, and no CU shared concerns, even after the collapse of a few major crypto platforms, such as FTX. In fact, most credit unions remained enthusiastic about their move into crypto-services.
Credit unions remained largely unconcerned even in late 2022, The Wall Street Journal reported that NYDIG laid off 110 people, cutting approximately 30% of its staff.
NCUA Response
In response to a query from CUToday.info related to any concerns over credit unions offering crypto services, NCUA responded with an e-mail, stating: “The NCUA issued Letter to Credit Unions, 21-CU-16 Relationships with Third Parties that Provide Services Related to Digital Assets in December 2021 and 22-CU-07 Federally Insured Credit Union Use of Distributed Ledger Technologies in May 2022. The actions of a third-party service provider do not change the NCUA’s position expressed in these two letters to credit unions.”
Letter to Credit Unions is Cited
Asked if NYDIG’s decision has impacted the agency's view on the type of crypto service offered by CUs—whether a non-custodial or custodial wallet is better—NCUA responded with a broad statement that “Credit unions should properly manage third-party relationships as described in Letter to Credit Unions, 07-CU-13 Evaluating Third Party Relationships issued in December 2007. Credit unions should provide access to financial services in a fair and equitable manner, and third-party service agreements should be managed to ensure member’s financial needs are met. If a federally insured credit union decides to offer cryptocurrency services to their members through a third-party arrangement, the credit union will need to determine the type of services that meets the member’s financial needs.”
The agency reminded that digital assets, such as cryptocurrencies, are not covered by the National Credit Union Share Insurance Fund.
In terms of what NYDIG’s pullout could mean for the future of credit unions and crypto offerings, NCUA again issued only a genera response, stating, “The NCUA recognizes the potential opportunities these products and technologies offer. We continue to urge credit unions to recognize the potential risks digital assets may pose to the credit union system and the broader financial services sector.”
‘An Unfortunate Byproduct’
As CUToday.info reported, Co-op Solutions partnered with NYDIG, saying it made the move to “empower members to access digital assets safely and securely via their credit union’s digital banking interface.”
“NYDIG’s trading platform being sunset is an unfortunate byproduct of lack of regulatory clarity in the cryptocurrency space,” said Bill Prichard, director of public relations for Co-op Solutions in Rancho Cucamonga, Calif. “Our views on crypto are relatively unchanged, as there is still consumer appetite as evidenced by the resurgence in the price of bitcoin, which is up more than 120% year to date. We have no immediate plans to replace NYDIG in the Strategic Provider Program, but will continue to watch the crypto market closely to see if appetite for credit unions to participate in the ecosystem returns.”