The financial world is undergoing a profound transformation, and credit unions, long valued for their community focus and member-centric approach, must adapt to remain relevant. As the integration of decentralized finance (DeFi) into the broader financial ecosystem accelerates, the need for credit unions to offer cryptocurrency custody solutions has never been clearer.
The election of President-elect Donald Trump, coupled with Senator Cynthia Lummis’ efforts to establish a national Bitcoin reserve through the BITCOIN Act, is a stark reminder that the era of digital assets is no longer a fringe movement—it is a fundamental shift in the financial paradigm. Credit union leaders must not only recognize this reality but act decisively to bridge the gap between traditional finance (TradFi) and DeFi, ensuring they are part of this new financial landscape rather than sidelined by it.
Bitcoin’s growing dominance: A threat to traditional finance
Since Trump’s election win, Bitcoin has surged past $95,000, with billions flowing into newly launched Bitcoin ETFs. This meteoric rise is more than a reflection of speculation—it’s a wake-up call. Money invested in Bitcoin represents funds either bleeding out of existing financial institution balance sheets or bypassing traditional financial institutions altogether.
Every dollar (or 3 billion dollars) moving into Bitcoin ETFs, exchanges, or self-custody wallets is a dollar credit unions may never see again. Yet, few in credit union leadership have a clear understanding of how much of their members’ money is disappearing into the crypto economy. This lack of awareness poses a significant threat to their institutions' future viability.
The $1.9 trillion reality: A market larger than credit unions
The Bitcoin market cap has grown to over $1.9 trillion, creating a liquidity pool larger than the entire credit union industry itself. This scale of adoption and investment cannot be ignored. The narrative that digital assets are speculative or niche has been shattered—Bitcoin has become a cornerstone of financial strategy for institutions, sovereign wealth funds, and individuals alike.
For credit unions to remain competitive, they must recognize this liquidity pool as both a challenge and an opportunity. Failure to engage with it will only further marginalize their role in the financial lives of their members.
Three reasons to act now:
- Member money is leaving—and no one is tracking it: Before you start shaking your fist, if you happen to be tracking your members’ money movement, you are already ahead of the curve. We’re glad to hear it. Most FI (bank and credit union alike) leaders are completely unaware of the scale of member funds flowing out of their institutions to digital asset exchanges and ETFs. Without tracking or reporting on this outflow, it’s impossible to quantify the impact or develop strategies to counteract it. This lack of visibility underscores the urgent need for tools and partnerships that can provide actionable insights.
- Bitcoin represents a generational shift in member expectations: Younger members, in particular, are driving the adoption of Bitcoin and digital assets. They expect financial institutions to provide seamless, secure access to these new tools. By failing to offer such solutions, credit unions risk alienating a critical demographic and eroding their relevance in the long term. And, if you’ve bothered to ask them, you know that most young people would rather own crypto than stocks; why do you suppose that is?
- The threat of obsolescence is real: The rapid rise of Bitcoin’s adoption represents a point of no return—a literal shift to recapitalization from the USD to BTC. Financial institutions that fail to adapt are at risk of becoming obsolete. Credit unions must develop a clear plan for custody and engagement with digital assets—not just to protect their balance sheets but to position themselves as forward-thinking leaders (if it’s not too late) in a rapidly evolving financial landscape.
Bridging TradFi and DeFi with crypto custody solutions
The good news is that credit unions are uniquely positioned to meet this challenge. Their member-first ethos and trusted relationships make them ideal candidates for bridging the gap between TradFi and DeFi. By partnering with your favorite CUSO to offer crypto custody solutions, credit unions can:
- Secure member funds: Provide insured and regulated custody options, ensuring members’ digital assets are safe.
- Track and reverse balance sheet bleed: Collaborate with industry innovators to measure outflows to crypto exchanges and ETFs, and implement strategies to attract those funds back into the institution.
- Expand financial offerings: Introduce products like Bitcoin-backed loans or savings accounts, laying the foundation for future innovation in payments and lending.
Partnering with a Credit Union Service Organization (CUSO) that has decades of combined experience in crypto and digital assets can empower leadership teams to implement these strategies effectively. Such partnerships provide the expertise and tools needed to track balance sheet bleed, reverse the trend, and drive dollars back into credit unions through member-focused, digital-first solutions.
Challenge the status quo
The truth is that many credit union leaders have been slow to act. The traditional mindset of ignoring new financial technologies until they’ve proven themselves is a nice idea, for followers, but not for leaders. Bitcoin is (and has been) here, its adoption is accelerating, and its implications are profound. Credit union executives must rise to the occasion, challenging themselves to learn, leverage, and lead in this new era of finance.
Here are a few practical steps you can take right now:
- Acknowledge the reality: Understand that, in spite of how much you might not like it, digital assets are here to stay. They represent a fundamental shift in how value is stored, transferred, and managed. A bit frightening maybe, but a reality nonetheless.
- Track member funds with precision: Develop systems to measure how much money is leaving your institution for crypto exchanges and ETFs. Use this data to inform strategic decisions and product offerings.
- Partner with experts: Collaborate with trusted industry innovators to implement secure, scalable, insurable, regulated, profit-generating custody, collateral, and payment solutions—giving you a permanent competitive edge.
- Educate members and staff: Equip your team with the knowledge and tools needed to guide members through the complexities of Bitcoin and digital assets. But remember, you can’t lead others where you have not yet been.
The Bridge has been built
The financial revolution is no longer on the horizon—it’s happening now. Credit union executives have a choice: take action and thrive or resist and become obsolete. By embracing crypto custody (and collateral and payment) solutions, you can reclaim your role as THE trusted financial partner in your community, attract new members, and secure your place in the future of finance. The bridge between TradFi and DeFi has been built. The only question is: will you lead your members across it, or will you let them leave you behind?
