Five Star Bank to offer digital bitcoin services

WARSAW, N.Y. — Five Star Bank, a subsidiary of Financial Institutions, Inc. (NASDAQ: FISI), announced that it will become one of the first financial institutions in the U.S. to enable its banking clients to securely buy, sell, and hold bitcoin, powered by NYDIG.

NYDIG is a bitcoin company based in New York City. Five Star Bank, based in Warsaw in Wyoming County, provides banking services across the Southern Tier, Finger Lakes, and Western regions of New York state.

Through this partnership, Five Star will enable customers to transact bitcoin securely through its banking mobile app and online-banking platform. It will also help them overcome barriers to adoption such as crypto wallets and key management, which are “often traditionally done through unregulated entities,” Five Star said. 

Five Star Bank accountholders are anticipated to be eligible to transact bitcoin “seamlessly and securely” by the end of the second quarter, according to a bank news release.

“We are thrilled to introduce a new — and trusted — digital banking option for customers to effortlessly acquire, sell, hold, and manage bitcoin alongside their traditional financial assets,” Martin Birmingham, CEO of Five Star Bank, said. “Thanks to NYDIG, we are creating a safe, efficient, and more user-friendly way for our customers to manage their digital transactions.”

NYDIG contends that its bitcoin platform meets the industry’s “highest” regulatory, audit, and governance standards, enabling financial institutions, like Five Star Bank, to maintain strict compliance programs, while “enhancing the digital banking experience” for customers. 

The firm’s “full-stack” bitcoin platform allows account holders to manage their bitcoin investments, alongside their traditional financial assets, which is “particularly innovative not only for the financial institution, but the banking industry,” Five Star contends.

“We knew it was in the best interest of our customers to build upon our digital-service menu in a way that better supports their interests, including an investment appetite for cryptocurrency. This is an area of the market that we have all seen grow exponentially over the last several years,” Sean Willett, chief administrative officer of Five Star Bank, said. “Some early investors have jumped into crypto headfirst, while most consumers have expressed an interest in a more secure and reliable way to transact bitcoin. We’re proud to be a part of that solution and view our partnership with NYDIG to be just one of many upcoming technology and banking-as-a-service innovations that will drive Five Star Bank forward.”

Five Star cited a 2021 survey that NYDIG commissioned as indicating that 81 percent of respondents said they’d be interested in purchasing bitcoin from their bank if the service was available. In that same survey, 71 percent of those responding who already owned the digital asset said they would be willing to switch their primary bank to one that offered bitcoin-related products and services, per its release.

By integrating bitcoin along with the bank’s suite of digital-banking products, Five Star Bank hopes to not only meet current customer needs, but also reach new customers, “including expanding outside the New York footprint.”

Five Star Bank plans to begin roll out of bitcoin services starting with an initial phase-in during the second quarter of this year. More details on timing and rollout will be made available in the near future, the bank said.

Five Star Bank is a $5 billion community bank offering consumer and commercial banking and lending services to individuals, municipalities, and businesses through a network of more than 45 branches. Its Central New York branches include offices in Auburn, Seneca Falls, Geneva, Ovid, Horseheads, and Elmira. Five Star Bank has about 560 total employees