Why ABA Invested in NYDIG: Supporting Banks as They Help Customers Access Cryptocurrency

By Rob Nichols
ABA Viewpoint

2021 was the year that cryptocurrency went mainstream. From a new record high for bitcoin to congressional hearings and regulatory reviews, cryptocurrency spent the past year in the spotlight and is expected to stay there in the coming year.

Outside the Beltway, consumer interest is growing, too. According to a Pew Research Center survey, 16 percent of Americans said they have invested in, traded or used cryptocurrency. While there remains significant uncertainty about the future of these assets, one thing is certain: they aren’t going away.

As more customers engage with cryptocurrency, they are increasingly looking to banks to help them safely hold these assets. This should come as no surprise. Banks are trusted custodians of their customers’ most important assets and their most sensitive data. A recent Morning Consult poll highlighted that banks are the most trusted among all financial services providers.

Banks are responding to this new customer demand and are actively evaluating ways to safely and responsibly allow their customers to buy, hold and sell digital assets through their existing banking relationships. Many banks believe this is an important step in ensuring they do not cede customer relationships to nonbanks offering similar services with fewer consumer protections.

The public policy debate around cryptocurrency is rapidly evolving and multifaceted. ABA believes that customers who choose to access these markets are best served when they can do so through fully regulated banks. We are advocating for regulatory clarity that will make it easier for banks to offer these services. At the same time, it is critical to ensure that all market participants are held to the same high standards as banks. While many digital assets are increasingly being viewed as a more mainstream part of the retail investment menu, there are areas of crypto that raise more concern than others, and ABA has well-developed views on assets like stablecoins and central bank digital currencies.

In addition to our advocacy, we think it is important to support our banks that choose to meet this growing customer demand. In December, ABA reinforced that belief with an investment in NYDIG, a leading provider of bitcoin solutions for banks. While there are several companies in the market, ABA believes an investment in NYDIG will support banks’ ability to meet customer demand in this rapidly evolving market. Here’s why:

  • Compliance-first approach. NYDIG operates with necessary licensees and charters and is highly focused on ensuring the regulatory compliance of its solutions. Notably, with NYDIG’s custody solution, bitcoin never touches the bank’s balance sheet, allowing banks’ customers to participate in trading through the bank while the bank avoids directly handling the bitcoin itself.
  • Partnerships that enable community bank participation. NYDIG has made the community bank market a priority and established partnerships with many core banking providers and digital front ends, such as Alkami, Allied Payment Network, CSI, FIS, Fiserv, Jack Henry, NCR and Q2.
  • Consistent with policy objectives. NYDIG is wholly focused on supporting banks, not competing with them. Its solutions enable banks to offer a product their customers are asking for. By partnering with NYDIG, a bank can build on the relationship and trust it has already earned and further meet its customers’ needs directly, rather than sending the customer to a third-party, nonbank provider.

We understand that expanding into cryptocurrency products and solutions won’t be for every bank, and that’s okay. We firmly stand with banks in their right to decide, according to their own judgment and market strategy, what products they will offer, and there are many valid and important factors that go into a bank’s decision about what products and services it offers. Cryptocurrency in particular is a topic where we find a mix of views among ABA members.

However, even with mixed opinions on the value of cryptocurrency as an asset class or as a basis for a product set, ABA believes strongly that banks should have access to the tools, partners and regulatory frameworks that allow them to meet their customers’ needs. NYDIG offers a solution that accomplishes just that, and ABA is proud and excited to support their efforts and take this sensible step into the crypto business on behalf of our member banks across the country.

ABA Viewpoint is the source for analysis, commentary and perspective from the American Bankers Association on the policy issues shaping banking today and into the future. Click here to view all posts in this series.


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