Plaid is adding crypto exchanges to its network

This week, some of the most popular cryptocurrency exchanges in the United States became partners of the financial data aggregator Plaid.

The move allows crypto investors using Binance.us, Gemini or Kraken to share financial data about their cryptocurrencies 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 blockchain exchanges Blockchain.com and BitGo to its network later this year. The new support for cryptocurrency extends to users of two companies that are already on Plaid’s platform that also gives 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 the mechanism for sharing data on users’ investment portfolios, as both are built on Investment’s API.

“This network extension is part of Plaid’s continued commitment to universal data access – to ensure that consumers can easily and securely connect all account types to the apps and services they choose to manage their financial lives,” said Ginger Baker, Plaid’s Chief Financial Officer. sa i announcement Thursday.

In 2021, Pew Research reported it 16% of Americans has invested in or used cryptocurrency. Cryptocurrency is a primary method of enabling people to exchange dollars for cryptocurrencies and then trade in those assets. While users can usually transfer these digital assets to a wallet that is not managed by the exchange, some choose 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 cryptocurrency information, such as asset types, balances and transactions, with other services they use to provide a more comprehensive picture of financial planning, tax advisory services, net worth calculations and other potential use matters.”

Plaid, which makes its money by letting challenger banks, other fintechs and financial institutions provide 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 cryptocurrency. This is done, the company claimed, by strengthening crypto’s connection “to consumers’ financial priorities” and allowing crypto-trading platforms to “quickly aboard customers, fund real-time accounts and connect with consumers in multiple locations.”

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

APIs provide a more secure method of collecting users’ financial data because they avoid the need for Plaid to store usernames and passwords that consumers have with other financial institutions. And while some countries require banks and fintechs to allow citizens to share their financial data across apps, such as APIs, the United States does not.

That is going to change in the years to come, but it is not the only motivation financial institutions have to play ball in the data aggregation game. Data sharing between financial institutions is often reciprocal, which means that banks, fintechs and now crypto exchanges can collect more data about users’ financial lives. For example, several banks have started offering data aggregation to customers so that they can see financial information across all providers, traditional and non-traditional, in one place.