February 08, 2022

NAFCU to HFSC: Ensure CUs are included in foundational digital asset reg framework

CapitolIn a letter sent ahead of the House Financial Services Committee hearing to review the President's Working Group (PWG) on Financial Markets' report on stablecoins, NAFCU's Brad Thaler explained that the absence of a clear regulatory environment and appropriate supervisory framework poses risks to the adoption of otherwise promising technologies, such as digital assets.

In addition, Thaler, NAFCU's vice president of legislative affairs, noted that while the report on stablecoins represents an important first step towards bringing rules and regulation to emergent stablecoin adoption, the report adopts and cites the Federal Deposit Insurance Act's definition of an insured depository institution, which does not include credit unions.

"By adopting this narrow definition, which includes banks and savings associations but not credit unions, the Report risks legislators and other regulators interpreting the Report as recommending that Congress enact legislation requiring a stablecoin issuer to obtain a bank charter – not either a bank charter or a credit union charter," wrote Thaler. "This arbitrary approach, if left unchecked, will result in competitive disadvantages, market distortions, and reduced innovation by excluding an entire class of federally insured and comprehensively supervised depository institutions from new markets for innovative products and services."

In the letter, Thaler urged Congress to explore ways to provide regulatory certainty and parity across the financial services system and ensure a level playing field for all. "We urge you to ensure the needs of credit unions are considered in any legislative approach you consider in the future," concluded Thaler.

Of note, NAFCU President and CEO Dan Berger previously wrote to Treasury Secretary Janet Yellen to point out the risks of excluding credit unions from the legislation requiring all payment stablecoin issuers to be insured depository institutions.  

In addition, Berger has urged the NCUA to take action on digital asset issues to ensure credit unions are not left behind as federal financial regulators move toward foundational federal digital asset regulation and legislation.

NAFCU will continue to engage Congress, the Treasury Department, the NCUA, and other federal financial regulators to call for credit unions to be granted the ability to engage with digital assets on equal footing with banks.