CUNA Economist: Warn Members About Cryptocurrency Risks

Source: Shutterstock.

A CUNA economist said credit unions should educate their members about the risks of cryptocurrencies as data shows they are disproportionately owned by credit union members and minorities.

CUNA senior economist Ligia Vado also called for cryptocurrencies to be regulated, saying credit unions should not be prevented from participating in the market — both long-standing positions of CUNA and NAFCU.

“Credit risks to cryptocurrencies are very high because cryptocurrencies operate outside the regulatory oversight that applies to transactions through banks and credit unions,” Vado said in an economic update video released by CUNA last week.

To advertise

“This lack of oversight also increases the risk of fraud and misconduct. They can be used for illegal trade because users operate anonymously,” she said.

Ligia Vado Ligia Vado

Vado said cryptocurrencies are in crisis as investors have lost billions of dollars.

Cryptocurrencies rely on distributed ledger technology. The most common is Blockchain, which supports Bitcoin and Ethereum.

Their values ​​tripled to quadrupled from January to November 2021, then collapsed, accelerating in April, wiping out all of Bitcoin’s gains since 2021 and nearly all Ethereum’s on Wednesday.

“Cryptocurrencies are subject to extreme volatility,” she said. “It’s not surprising that cryptocurrencies are not widely used as a means of payment in the United States.”

Vado also presented results from the 2022 National CUNA Voter Poll, which found that 26% of respondents said they own some form of cryptocurrency.

The 2022 CUNA Voter Survey was conducted online from January 18-23 with 2,500 registered voters. Lago said that registered voters tend to be better educated and have higher incomes than unregistered voters, which she says is one of the reasons why the poll found that 26% of registered voters owned cryptocurrencies, while market research showed the penetration 10 % was in 2021 and is expected to reach 12.8. % by the end of 2022.

The survey also found that cryptocurrencies belong to:

  • 39% of credit union members, compared to 17% of non-members;
  • 59% of registered voters aged 18-34, compared to 47% of those aged 35-65 and 3% of those over 65;
  • 48% Spanish;
  • 36% black;
  • 25% Asian; and
  • 22% white.

Vado said the higher ownership among Hispanics could be explained by the widespread adoption of cryptocurrencies in some Latin American countries to hedge against inflation and exchange rate volatility.

“Hispanic Americans, as well as other migrant communities, could use cryptocurrencies to send money transfers to their home countries more efficiently and affordably,” she said.

“There is no clear explanation for the greater propensity of credit union members to own crypto other than to enjoy the benefits of crypto such as easier and safer transactions, more efficient and transparent cross-border payments and services available 24/7. “, she says.

Vado didn’t explain why black voters had a higher percentage of ownership for cryptocurrencies, but similar results were found in a study by Ariel Investments and Charles Schwab published in April.

Ariel-Schwab’s research found that by 2022, only 58% of Black Americans and 63% of White Americans owned stocks.

However, 25% of black people owned cryptocurrency, compared to just 15% of white investors. Among investors under 40, ownership was 38% among blacks and 29% among whites.

The survey found that 33% of black investors and 18% of white investors believed cryptocurrencies were safe, and 30% of black investors and 14% of white investors thought cryptocurrencies were regulated by the government — “despite headlines on volatility in cryptocurrency values, platform hacks and a lack of government regulation,” the study states.

Mellody Hobson, co-CEO and president of Ariel Investments, said the combination of low stock market participation, an appetite for risky investments and an “alarming lack of knowledge about the fundamentals of investment principles is a wake-up call about the critical need for better investor training”.

Melody Hobson Melody Hobson

“Many new and younger investors have never experienced the volatility of the market as we have seen over the past two years, and we have a responsibility to educate these new investors about the value of long-term investments to build wealth and provide financial security reach,” she said. said.

The CUNA video released in June preceded Fed Vice Chair Lael Brainard’s call for cryptocurrency regulation in a July 8 speech.

“Although presented as a fundamental departure from traditional finance, the crypto-financial system appears to be prone to the same risks that are all too familiar with traditional finance,” Brainard said.

Lael Brainard Lael Brainard

“Rather than stifling innovation, strong regulatory safeguards will empower investors and developers to build a resilient digital-native financial infrastructure,” she said. “Strong regulatory safeguards will help banks, payment providers and financial technology (fintech) companies improve customer experience, accelerate settlement, reduce costs and enable rapid improvement and customization of products,” said Brainard. “Now is a good time to establish which crypto activities are allowed for regulated entities and under what restrictions so that the impact on the core financial system remains well controlled.”

Leave a Comment