CUNA Announces Blockchain Platform: Onsite at ACUC
SEATTLE — CUNA, in partnership with the Mountain West Credit Union Association, is looking for a few good credit unions — 125 to be exact — to participate in the industry’s first ever development of a blockchain technology platform.
During the final general session Wednesday at the national trade association’s America’s Credit Union Conference at the Washington State Convention Center, CUNA’s Chief Operating Officer Rich Meade introduced the CU Ledger Initiative, a proof-of-concept project.
The concept is to create a credit union system-wide permissioned distributed shared ledger, more commonly referred to as blockchain technology platform, which has the potential to substantially improve the speed, efficiency and security of all types of financial transactions. The permissioned distributed shared ledger system would only include credit unions and CUSOs.
Meade said he has verbal commitments from the $1.7 billion Royal Credit Union in Eau Claire, Wis., the $2.1 billion Chartway Credit Union in Virginia Beach, Va., and the $1.6 billion American Heritage Federal Credit Union in Philadelphia.
Three CUSOs, CO-OP Financial Services, PSCU and CUDL, have also verbally committed to the project, he said.
In May, CO-OP and TMG announced they commissioned a study on blockchain to help credit unions create a framework for evaluating this emerging digital technology. Mercator Advisory Group, a Maynard, Mass.-based payments consulting firm, was commissioned to conduct the study, which is expected to be completed by late summer.
To participate in the CU Ledger Initiative, credit unions will be asked to each make a $10,000 contribution to offset the costs of the research.
“This is why we are doing the proof of concept first,” Meade said. “We don’t know whether or not credit unions will jump on this. We don’t know if they want to be innovators on this. We hope they are. But we don’t know they will be.”
Although Meade said 125 credit unions are needed to fund the project, he would like to see more than double that number of credit unions on the blockchain technology system to fully test and evaluate it.
Meade said the project is open to credit unions of all asset sizes.
CUNA plans to hold a webinar at the end of July for members that will explain the project in more detail.
Credit unions and their members would benefit in a number of ways from a dedicated shared-ledger platform, he said. Chief among them include participation in a credit union industry-specific payments system that would not be dependent on others and the enhanced security of data for possible financial and identify applications.
“This potential platform could be the next generation of the shared branching network,” Meade said. “This is not a singular step this is a leap into the future. This could be a game changer.”
A distributed ledger is a digital record of ownership that does not include a central administrator or central location for stored data. Asset owners use cryptographic signatures to debit and credit accounts, which makes distributed ledgers unforgeable.
The blockchain concept, which was first developed by Bitcoin, is a public ledger of all executed transactions that runs without a financial institution or another entity as its primary authority. Proponents of blockchain technology believe it could introduce trust and transparency to any online transaction.
The CUNA/Mountain West Credit Union Association project, however, would not involve Bitcoin transactions.
Meade said the Mountain West association spearheaded this project after a presentation about blockchain technology applications was made earlier this year by John Best, CEO of the Best Innovation Group in Colorado Springs and a CUNA consulting partner.