How Credit Unions Can Take Advantage of the NCUA’s Crypto Guidance

The National Credit Union Association delivered an early gift to the institutions it regulates – guidance for handling digital assets such as cryptocurrency.

A growing number of credit unions have shown interest in offering crypto services to their members. Still, many have been reluctant to take the plunge without parameters from the NCUA. The agency’s guidance should provide some comfort for leery executives.

The big takeaway is that the NCUA will not prohibit nationally chartered credit unions from forging relationships with third-party providers that offer digital-asset services. Those credit unions will not be limited in the products and services they introduce to members through those third parties.

Credit unions are fortunate to have forward-looking leadership at the NCUA, including Vice Chairman Kyle Hauptman, who had a prominent role in drafting the guidance.

Crypto-curious credit unions should view this guidance positively. Key decisions need to be made early in the planning process, and SRM can assist your team as it prepares to offer crypto solutions.

Here are several things to consider:

• Educate your leadership as soon as possible. Prepare to conduct proper due diligence that includes evaluating all options at your disposal – do not rush a product to market.
• Anything you pursue should be scalable, with the ability to accommodate a variety of cryptocurrencies.
• Read the NCUA’s guidance carefully. The letter states the contractual inclusions that should be established between the credit union and the third party. Make sure you have airtight policies, procedures, compliance, and risk ratings – treat the relationship just like you would data security.
• Ensure that your marketing requirements are laid out clearly. Make sure your members completely understand the terms, conditions, and pricing associated with the services you are offering.

The NCUA noted that further guidance might be needed “as questions continue to arise related to” digital assets and distributed ledger technology (DLT), which could include regulatory and statutory changes. The agency acknowledged that some activities tied to digital assets would fall under the jurisdiction of the SEC, CFTC, and FinCEN, noting that it will continue to study and assess those circumstances.

SRM will continue to monitor future developments, and we urge credit unions to do the same.

The Bottom Line

SRM has been studying the cryptocurrency market for the past year, including the evolving regulatory climate.

We were involved in the NCUA’s process, including responding to the agency’s request for comment. The NCUA allowed us to participate in many of the discussions leading up to the recently released guidance. The comment letters provided to the NCUA were overwhelmingly positive – it was clear that credit unions wanted to enter the digital asset space.

SRM is already helping many credit unions evaluate and implement cryptocurrency strategies. Contact us to schedule a time to discuss this evolving space and your place in it.