April 19, 2023

NAFCU reiterates need for proper oversight of digital assets

US Capitol buildingThe House Financial Services Subcommittee on Digital Assets, Financial Technology and Inclusion holds a hearing today to discuss stablecoins, including draft legislation that could be used to regulate stablecoins. Ahead of the hearing, NAFCU Vice President of Legislative Affairs Brad Thaler sent a letter to subcommittee leaders reiterating the need for clear regulations and supervisory framework – without which “poses risks to the adoption of these otherwise promising technologies.”

“[D]istributed ledger technology and other technologies that support a broad ecosystem of digital assets offer an array of potential operational efficiencies,” Thaler wrote. “For example, the ability to facilitate payment transactions that support smart contracts, either through use of stablecoins or other digital assets, may help members with specific business needs and potentially reduce credit unions’ operational costs. Most importantly, digital asset technologies can be designed with strong auditability features, which can enhance regulatory compliance and reduce instances of human error, fraud, and other misconduct.”

Thaler provided feedback on the draft bill under consideration, noting it’s “a step in the right direction.” Thaler expressed NAFCU’s support for:

  • using the Federal Reserve definition of an insured depository institution, which would include credit unions, to ensure the credit union industry does not face barriers to adopting digital assets and hinder its service to underserved and low-income communities; and
  • enforcement and examination by existing regulators – including the NCUA for credit unions – and a framework for oversight of non-depository stablecoin issuers.

Cryptocurrency was a hot topic in Washington Tuesday, as the House Financial Services Committee held an oversight hearing of the Securities and Exchange Commission (SEC), and Federal Reserve Gov. Michelle Bowman spoke at a Georgetown University event about a central bank digital currency (CBDC).

During the SEC oversight hearing, lawmakers raised concerns about enforcement efforts without the commission providing regulatory clarity for the industry.

Bowman, in her speech, provided an update on the Fed’s research into developing a U.S. CBDC.

“Of course, as the evolution of money and payments continues, it is important for the Federal Reserve to continue looking ahead to anticipate potential changes to money and payments well into the future,” Bowman said. “With this in mind, our consideration of other potential innovations to money and payments, including a potential U.S. CBDC, must be viewed through the lens of whether and how the payment system would be improved beyond what instant payment services will achieve. We should ask ‘what current frictions exist or may emerge in the payment system that only a CBDC can solve, or that a CBDC can solve most efficiently?’”

NAFCU has consistently opposed the Fed’s development of a CBDC, arguing credit unions are a better option for making fast, safe and affordable payments. The association will continue to advocate for a clear regulatory framework for cryptocurrency and other financial technologies to support innovation and adoption while reducing risks.