Plaid adds crypto exchanges to its network

This week, some of the most popular cryptocurrency exchanges in the U.S. became partners to the finance data aggregator Plaid.

The move allows crypto investors who use Binance.us, Gemini or Kraken to share financial data about their crypto holdings across applications just as they can share financial data about their bank accounts and investment portfolios across apps in Plaid’s network.

Plaid said it would add crypto exchanges Blockchain.com and BitGo to its network later this year. The new support for cryptocurrency extends to users of two companies already on Plaid’s platform that also give users access to crypto trading: the personal finance company SoFi and the stock trading app Robinhood.

Plaid’s data sharing mechanism for cryptocurrency is the same as its mechanism for sharing data about users’ investment portfolios, as both are built on its Investments API.

“This network expansion is part of Plaid’s continued commitment to universal data access — to ensure consumers can easily and safely connect all account types to the apps and services they choose to manage their financial lives,” Ginger Baker, head of financial access for Plaid, said in the Thursday announcement.

In 2021, Pew Research reported that 16% of Americans have invested in or used cryptocurrency. Crypto exchanges are a primary method for enabling people to exchange dollars for cryptocurrencies and then to trade in those assets. While users can typically transfer those digital assets to a wallet that is not managed by the exchange, some opt to keep their digital assets with the exchange.

“Many crypto investors acquire and hold their digital assets in accounts separate from their other investments,” Baker said. “Through Plaid, they can now securely share their crypto account information, such as asset types, balances and transactions, with other services they use to provide a more comprehensive picture for financial planning, tax advisory services, net worth calculations, and other potential use cases.”

Plaid, which makes its money by enabling challenger banks, other fintechs and financial institutions to give and receive financial data on consenting users to and from other financial institutions and fintechs, recently argued in a white paper that data sharing maximizes crypto’s value. This happens, the company argued, by strengthening crypto’s connection “to consumers’ financial priorities” and allowing crypto trading platforms to “quickly onboard customers, fund accounts in real time, and connect with consumers in more places.”

Although Plaid now calls itself an “API-first company,” it, like other data aggregators, still uses screen scraping to collect data in some cases. Some banks block screen scraping in an effort to bring data aggregators into an API-based exchange of financial data. Wells Fargo, for example, has campaigned to end screen scraping on its digital platform for years and says it has made progress.

APIs provide a more secure method of aggregating users’ financial data because they obviate the need for Plaid to save usernames and passwords that consumers have with other financial institutions. And while some countries require banks and fintechs to enable citizens to share their financial data across apps, such as with APIs, the U.S. does not.

That is set to change in coming years, but it is not the only motivation financial institutions have for playing ball in the data aggregation game. Data sharing among financial institutions is often reciprocal, which allows banks, fintechs and now crypto exchanges to collect more data on their users’ financial lives. More banks, for instance, have begun providing data aggregation for customers so that they can see their financial information across all providers, traditional and nontraditional, in one place.

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