NCUA releases letter to credit unions about distributed ledger technologies

NCUA recently released NCUA Letter to Credit Unions 22-CU-07 (letter) discussing the use of distributed ledger technologies. NCUA’s tone suggests a “form-agnostic” approach, one championed by NAFCU in a September comment letter to NCUA relating to Digital Assets and Related Technologies RFI, to the use of distributed ledger technologies by federally insured credit unions (FICUs). In its letter, NCUA offers a framework for FICUs interested in dipping their toes in the proverbial distributed ledger technologies-pond and to deploy the technologies for “permissible activities,” so long as FICUs follow both applicable state and federal laws and regulations.

NCUA provides general guidance on how a FICU may evaluate the use of distributed ledger technologies and “signal[s] to the broader financial and technology communities that credit unions are a market to consider when designing products, considering partnerships, or making investments.” NCUA’s letter also emphasizes a rapidly evolving technological environment and acknowledges the additional applications of distributed ledger technologies may require additional due diligence obligations by credit unions and approaches that may go beyond the initial general guidance. In other words, this will likely not be the last NCUA letter relating to this type of technology.

NCUA expects FICUs to treat distributed ledger technologies similar to other “new and emerging” tech, highlighting the need to exercise judgment, sound business practices, and due diligence. The letter directs FICUs to determine the permissibility of the activity and to assess opportunities and risks relative to each activity. The letter also stresses the considerations NCUA suggests FICUs weigh when evaluating the distributed ledger technologies may change based on the technologies’ different applications and to not construe these considerations “as all inclusive.”

 

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