Last call for comments on NCUA’s digital assets RFI

At the end of July, the National Credit Union Administration (NCUA) published a request for information (RFI) in the Federal Register on decentralized finance (DeFi), digital assets , distributed ledger technology (DLT), and other things that might be necessary to incorporate DeFi and digital assets into delivering products and services to credit union members. The RFI indicated that the NCUA must receive any comments no later than September 27, 2021. NAFCU credit union members can also submit comments to NAFCU through this link from NAFCU’s Regulatory Alert on the RFI. Comments to NAFCU should be submitted no later than September 13, 2021—next Tuesday.

NAFCU’s Regulatory Alert provides a brief introduction to the concepts of DeFi, digital assets, and DLT. As described in both the Regulatory Alert and the RFI, DLT is the underlying technology that makes DeFi possible. A real-world example might be helpful in putting all of this together. Ethereum is the technology that supports several applications intended to make financial services open to anyone that can use the technology. This open access is at the core of DeFi, and the DeFi applications that are based on Ethereum permit users to do all sorts of things, such as obtaining traditional banking services like lending and payment functions. But they can do so without going to a traditional financial institution like a credit union. As noted in introductory material found on Ethereum.org, “Ether is the cryptocurrency used to pay for computing services on the Ethereum blockchain.” It is an asset used to pay for the transactions facilitated by the Ethereum technology and its associated applications.

That said, these new technologies do not always have to be used together. NAFCU’s Regulatory Approaches to Financial Technology whitepaper suggested that credit unions and other institutions might be able to use DLT to address compliance concerns:

 

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