Administration Affirms Crypto Partnerships for Credit Unions

Federally insured credit unions (FICUs) in the United States may partner with third-party providers to offer their members digital asset services.

Sponsored
Sponsored

These services may include enabling “FICU members to buy, sell, and hold uninsured digital assets,” according to the National Credit Union Administration (NCUA). In a recent letter, the NCUA emphasized that the authority of FICUs to engage in such partnerships already existed, provided certain conditions are met. In the case of federally insured, state-chartered credit unions (FISCUs) however, it rather depends upon local laws and regulations.

The NCUA is one of two federal agencies that provide deposit insurance to depositors in U.S. depository institutions. While the Federal Deposit Insurance Corporation (FDIC), insures commercial banks and savings institutions, the NCUA covers credit unions. As an insurer, the NCUA said it does not prohibit FICUs from establishing these relationships. 

Sponsored
Sponsored

The NCUA said that such relationships would be evaluated no differently than any other third-party relationships. It stressed that this depended on “a FICU exercising sound judgment and conducting the necessary due diligence, risk assessment, and planning when choosing to introduce or bring together an outside vendor with its members.” To this end, the administration added that FICUs should establish effective risk measurement, monitoring, and control practices for such third-party arrangements.

Offering clarity

According to NCUA vice chair Kyle Hauptman, the guidance was prompted by two things in particular that had occurred in the market. “Credit unions have been watching endless outflows of cash to crypto exchanges, and many people would rather use their primary financial institution for their first foray into crypto investing,” Hauptman said. “Today’s guidance helps both concerns and gives a new revenue stream to credit unions [that] want to try it out.”

Although the letter served as an effort to offer clarity regarding FICUs’ ability to provide crypto services for their members, the NCUA said further guidance may be necessary as digital assets continue to evolve. Consequently, the administration said it would continue to study and address issues as they arise.

Disclaimer

All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.

Share Article

Nick is a data scientist who teaches economics and communication in Budapest, Hungary, where he received a BA in Political Science and Economics and an MSc in Business Analytics from CEU. He has been writing about cryptocurrency and blockchain technology since 2018, and is intrigued by its potential economic and political usage. He can best be described as an optimistic center-left skeptic.

Follow Author