The United States National Credit Union Administration (NCUA) has granted domestic credit unions that are under the aegis of the Federally Insured Credit Unions (FICUs) the permission to enter into business partnerships with third-party digital currency trading platforms.
As contained in a letter addressed to the credit unions, the NCUA said its aim is to eliminate all lack of clarity in the designated model in which the credit unions operate.
“The purpose of this letter is to provide clarity about the already existing authority of federally insured credit unions (FICUs) to establish relationships with third-party providers that offer digital asset services to the FICUs’ members, provided certain conditions are met. This includes third-party provided services to allow FICU members to buy, sell, and hold uninsured digital assets with the third-party provider outside of the FICU. Digital assets are one of many terms used to describe distributed ledger technology (DLT) based tokens,” the NCUA letter reads.
Following the new clarity provided, the NCUA said it is not prohibiting business associations with cryptocurrency-based firms to work under the new change and it said it will be approving all forms of proposed partnerships between its members and crypto firms in the near future.
The NCUA also said in the letter that it plans to establish a more robust guideline that will give clearer direction to credit unions in the country as it relates to Digital Assets service providers.
“A [union’s] relationship with third parties offering [crypto-related] services and related technologies will be evaluated by the NCUA in the same manner as all other third-party relationships,” the regulator said, adding that “This includes 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. FICUs should establish effective risk measurement, monitoring, and control practices for such third-party arrangements.”
With this prompt, industry participants will not need to operate in a vacuum or do anything that will be against the law, the way the SEC is accusing Ripple of trading XRP coin as a security, stirring a lawsuit.
Federally insured credit unions (FDICs) are permitted to establish relationships with digital asset services, according to new regulatory guidance.
This means that U.S. credit unions can refer their members to digital asset services.
Credit unions serve 126 million American citizens, representing just under 39% of the U.S. population.
Share this article
URL Copied
Federally insured credit unions (FICUs) are now permitted to work with digital asset services, according to new regulatory guidance.
Credit Unions Can Refer Members to Digital Assets Services
A Dec. 16 letter from the National Credit Union Administration says that credit unions have the existing authority to form relationships with third-party digital asset services. This includes services that allow clients to buy, sell, and hold uninsured digital assets.
“As insurer, the NCUA does not prohibit FICUs from establishing these relationships,” the government agency’s letter reads.
It goes on to establish the conditions in which credit unions can refer members to other services. In particular, credit unions can refer members to a non-deposit service so long as it offers similar risks to a credit union. Those services must also be useful and logically related to the credit union’s other business activities.
Ultimately, FCIUs are “not limited” in the services that they can refer members to, but must use “sound judgment and due diligence.” This leaves credit unions free to refer members to crypto services.
The NCUA noted that other U.S. regulators, such as the SEC, CFTC, and FinCEN have authority over some crypto activity. It noted that credit unions “should be cognizant of this fact” and that it will “continue to study and address these issues.”
Previous Developments in Crypto Banking
Today’s news may be relatively minor, as only about 126 million Americans are members of credit unions—representing less than 39% of the population of the United States.
Nevertheless, this development adds to the ways in which banks and financial institutions are explicitly allowed to work with crypto. The OCC permitted banks to work with stablecoins in September 2020. The SEC and OCC also issued statements allowing banks to act as digital asset custodians in the same year.
Additionally, Texas regulators allowed banks in that state to store cryptocurrency for their clients in June 2021.
Recent statements from the Federal Reserve, OCC, and FinCEN suggest that the role of banks in the crypto market will be further refined in 2022 following inter-agency discussion.
Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and other cryptocurrencies.
Share this article
URL Copied
The information on or accessed through this website is obtained from independent sources we believe to be accurate and reliable, but Decentral Media, Inc. makes no representation or warranty as to the timeliness, completeness, or accuracy of any information on or accessed through this website. Decentral Media, Inc. is not an investment advisor. We do not give personalized investment advice or other financial advice. The information on this website is subject to change without notice. Some or all of the information on this website may become outdated, or it may be or become incomplete or inaccurate. We may, but are not obligated to, update any outdated, incomplete, or inaccurate information.
You should never make an investment decision on an ICO, IEO, or other investment based on the information on this website, and you should never interpret or otherwise rely on any of the information on this website as investment advice. We strongly recommend that you consult a licensed investment advisor or other qualified financial professional if you are seeking investment advice on an ICO, IEO, or other investment. We do not accept compensation in any form for analyzing or reporting on any ICO, IEO, cryptocurrency, currency, tokenized sales, securities, or commodities.
See full terms and conditions.
SEC Chair Gensler Thinks Crypto Regulation Will Bring Adoption
SEC chairman Gary Gensler has commented on his approach to cryptocurrency regulation, stating that investor protection is a top priority before wider adoption can occur. Gensler Vows to Protect Investors…
What is Rarible: A DAO for NFTs
What was once dismissed as a silly and expensive sector, NFTs give creators access to global markets in a way that’s never been possible before, and it’s all thanks to blockchain.Those familiar…
FTX Proposes Changes to U.S. Crypto Regulations
Crypto exchange FTX has published a document suggesting changes to U.S. regulations that could provide greater flexibility. The document lays out ten principles. FTX Wants Primary Regulator Option FTX has weighed…
Elizabeth Warren Tells SEC to Discuss Crypto Regulation
U.S. Senator Elizabeth Warren has published a letter to the SEC, asking the regulatory body to confront the potential risks of cryptocurrency and answer questions about current regulation. Regulations Are…
