How BankSocial And Metallicus Are Banking On Blockchain In 2024

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While there has been a combination of excitement over the SEC approval of a Bitcoin
ETF along with chagrin over SEC enforcement actions against crypto exchanges from UniSwap to Robinhood, a couple of companies are quietly leveraging how the underlying technology of crypto known as blockchain could transform the future of banking. As a former Federal Deposit Insurance Corporation (FDIC) regulator during the Global Financial Crisis in 2008, I won second prize in an internal contest for suggesting that by 2020, we would be using mobile phones for our banking services.

As technologies have the tendency to accelerate much faster than we imagine, some recent announcements show that blockchain technology may be the next emerging technology to transform banking. Two companies – Metallicus and BankSocial – are focused on this transformative technology and are banking on regulatory support for their innovations in the banking space with blockchain.

Metallicus offers a new program since January called the Metal Blockchain Banking Innovation Program. The program boasts at least three credit unions including Vibrant, Meritrust Credit Union, and Fairwinds that have signed up in a partnership to work on custom use cases using blockchain technology, get support with integrated fintech partnerships, research and development grants, and expert collaboration with seasoned industry professionals to incorporate 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 deploy blockchain solutions. … But the biggest challenges right now are that they don’t have the resources, they don’t know what technology to use and they also have issues with regulators being able to build these programs,” said Frank Mazza, director of blockchain and digital assets for Metallicus.

Meanwhile, Metallicus is not the only potential partner for credit unions as BankSocial, a company running on Hedera
Hashgraph distributed ledger technology, offers what it describes as the only crypto exchange for credit unions and offers a unique Know Your Customer (KYC) solution as well. BankSocial is also aiming to get a charter as a credit union that would be called ‘DeFy Federal Credit Union’.

“Our end goal is not to create the largest credit union ever invented with [the proposed] Defy Federal Credit Union, but rather to create a template” where credit unions can easily participate in a Web3 ecosystem, says John Wingate, chief executive and founder of BankSocial.

What is interesting is how credit unions appear to be both courted by these Web3 companies for partnerships and collaborations, as opposed to banks. The National Credit Union Administration’s (NCUA) guidance in 2022 provided support in exploring DLT technologies to better serve the members of credit unions while also laying out the expectations for those credit unions choosing to explore or use the technology.

This is also 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 that was 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,” Rich Meade, chief of staff/COO for CUNA, said. “This technology could be the next email, the next internet, the next big thing, so we’re really excited about doing that.”

Since then, CULedger changed its name in 2021 to Bonifii and is a credit union-owned CUSO (credit union service organization) and has a primary focus on protecting credit union customers from fraud with identity verification solutions.

It will definitely be interesting to see if credit unions can innovate with blockchain and adopt the underlying technology, and whether this tortoise can beat out the more exciting and newsworthy hare of banks focused on the Bitcoin ETF and the ability to offer custody or trading services of crypto tokens. For at least the custody and trading of crypto, banks are already stymied by the SEC ABA 121 that requires a significant amount of assets just to custody the crypto of its customers. In addition, the Federal Reserve, as well as the FDIC and the Office of the Comptroller of the Currency (OCC), have identified the risks associated with crypto and require a bank to obtain additional supervisory approval prior to engaging in any cryptocurrency services.

So, it may be companies such as Metallicus on the Metal Blockchain or BankSocial on the Hedera Hashgraph that can ultimately crack the credit union marketplace leveraging blockchain or DLT technology, and potentially make credit unions more technologically advanced than banks.

Disclosure: In the past, I have been a paid consultant to both Metallicus and Hedera. However, I currently do not own any hbars that run on Hedera or Metal, the native token on the Metal Blockchain. I own a small amount of Bitcoin and Pepe