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How BankSocial and Metallicus are aiming for Blockchain in 2024
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While there has been a combination of excitement over the SEC approval of a Bitcoin
Bitcoin
ETFs, coupled with disappointment over SEC enforcement actions against cryptocurrency exchanges from UniSwap to Robinhood, a pair of companies are quietly capitalizing on how the technology behind cryptocurrencies known as blockchain could transform the future of banking. As a former regulator of the Federal Deposit Insurance Corporation (FDIC) during the 2008 global financial crisis, I won second prize in an internal competition for suggesting that by 2020 we would be using cell phones for our banking services.
As technologies have a tendency to accelerate much faster than we imagine, some recent announcements show that blockchain technology could be the next emerging technology to transform the banking industry. Two companies, Metallicus and BankSocial, are focused on this transformative technology and targeting regulatory support for their innovations in the blockchain banking space.
Metallicus has been offering a new program called the since January Metal Blockchain Banking Innovation Program. The program boasts at least three credit unions included Vibrant, Meritrust Credit UnionAND Strong wind who have signed a partnership to work on custom use cases using blockchain technology, get support with integrated fintech partnerships, R&D grants, and expert collaboration with experienced industry professionals to embed regulatory compliance with this innovative technology.
“What we know from our years of experience and research in the market is that many banks and credit unions want to implement blockchain solutions…. But the biggest challenge right now is that they don’t have the resources, they don’t know what technology to use and they also have problems with regulators being able to build these programs,” said Frank Mazza, director of blockchain and digital assets for Metallicus.
Meanwhile, Metallicus isn’t the only potential partner for credit unions BankSociala company that operates on Hedera
Ivy
Hashgraph distributed ledger technology offers what it describes as the only cryptocurrency exchange for credit unions and also offers a unique Know Your Customer (KYC) solution. BankSocial is also aiming to obtain a charter as a credit union that would be called “DeFy Federal Credit Union.”
“Our ultimate goal is not to create the greatest credit union ever invented [the proposed] Challenge the Federal Credit Union, but rather create a model” where credit unions can easily participate in a Web3 ecosystem, says John Wingate, CEO and founder of BankSocial.
What’s interesting is how credit unions seem to be courted by these Web3 companies for partnerships and collaborations, as opposed to banks. The National Credit Union Administration (NCUA) guide in 2022 provided support in exploring DLT technologies to better serve credit union members, while outlining expectations for those credit unions choosing to explore or utilize the technology.
Additionally, this is not the first exploration of blockchain technology by credit unions. In 2016, CU Ledger was a proof-of-concept project based on distributed ledger technology led by the Credit Union National Association and the Mountain West Credit Union Association and designed to prepare credit unions for the future. “This could be a real game changer,” said Rich Meade, CUNA chief of staff/COO. “This technology could be the next email, the next Internet, the next big thing, so we’re really excited to do it.”
Since then, CULedger has changed its name in 2021 to Bonifii and is a CUSO (credit union service organization) owned by credit unions and primarily focuses on protecting credit union customers from fraud with identity verification solutions.
It will certainly be interesting to see if credit unions can innovate with blockchain and adopt the underlying technology, and if this tortoise can beat the more exciting and noteworthy hare of banks focused on the Bitcoin ETF and the ability to offer services custody or trading of cryptographic tokens. At least when it comes to storing and trading cryptocurrencies, banks are already hampered by SEC ABA 121 which requires a significant amount of assets just to store their customers’ cryptocurrencies. Additionally, the Federal Reserve, as well as the FDIC and the Office of the Comptroller of the Currency (OCC), have identified risks associated with cryptocurrencies and require a bank to obtain additional regulatory approval before engaging in any cryptocurrency service.
So, it could be companies like Metallicus on Metal Blockchain or BankSocial on Hedera Hashgraph that can ultimately crack the credit union market by leveraging blockchain or DLT technology and potentially make credit unions more technologically advanced than banks.
Disclosure: I have been a paid consultant for both Metallicus and Hedera in the past. However, I currently do not own any hbars that work on Hedera or Metal, the native token on the Metal Blockchain. I own less than $1,000 in Bitcoin and Pepe tokens.