NCUA Says Federal Credit Unions Can Provide Crypto Services
According to Bloomberg on Tuesday (Dec. 21, 2022), the desire for credit unions to get involved in crypto comes shortly after the National Credit Union Administration (NCUA), the body that regulates federal credit unions in the United States, revealed that FICUs can partner with third-party companies that provide digital asset services.
The announcement noted that services could include allowing
“FICU members to buy, sell, and hold uninsured digital assets with the third-party provider outside of the FICU.”
According to the NCUA letter published on December 16, the FICUs’ relationship with such third parties will depend on certain conditions.
While the letter stated that FICUs were not restricted to the types of services they offer members via third parties, the NCUA emphasized the importance of these credit unions to exercise due diligence and follow existing guidelines when choosing a third-party provider for cryptocurrency.
“FICUs should take care to select an appropriate third-party service provider before entering into an arrangement that allows for the provision of digital asset services to the FICUs’ members. In selecting a third-party service provider, FICUs should review NCUA’s existing guidance on evaluating third-party relationships and third-party due diligence.”
Furthermore, the regulator said that credit unions looking to offer crypto services should carefully evaluate the risks associated with such digital assets, which are uninsured according to the NCUA. In addition, the credit union regulatory body should be responsible when advertising or marketing crypto assets to its members.
The NCUA stressed that FICUs should inform members that digital assets are not guaranteed by the FICU, are offered by a third party, may come with fees, are speculative and volatile, and are not federally insured. An excerpt from the letter said:
“FICUs offering members the opportunity to obtain digital assets and related services through a third-party arrangement must neither mislead nor confuse members as to the nature or risks of these uninsured products. To avoid member confusion, third parties should not offer products with a product name that is intentionally similar to a FICU’s name.”
Credit Unions Want to Offer Crypto Custody Service like Banks
While the NCUA letter gives the regulatory go-ahead to credit unions that are looking to offer crypto services, the agency said that it would offer further clarification and guidance, as the cryptocurrency sector continues to rapidly evolve.
Responding to the NCUA announcement, was Patrick Sells, New York Digital Investment Group’s (NYDIG) chief innovation officer, who said that the firm was already working with credit unions. According to Sells, the letter could prompt more FICUs to offer Bitcoin products to their members by next summer.
The vice president of regulatory affairs for the National Association of Federally-Insured Credit Unions, Ann Kossachev, said that her trade union is seeking explicit regulatory approval that would allow credit unions to provide custody services for digital assets.
Also, the senior director of advocacy for payments and cybersecurity at the Credit Union National Association, Lance Noggle, also said that his trade group will keep working with the NCUA with the hope that there will be robust guidelines that would allow credit unions custody crypto.
Meanwhile, the Office of the Comptroller of the Currency (OCC) back in July 2020 gave the greenlight for U.S. federal banks to offer cryptocurrency custody service.