ALEXANDRIA, Va.–NCUA has issued a new Letter to Credit Unions that clarifies certain expectations for credit unions contemplating the use of new or emerging distributed ledger technologies (DLT).
In the letter (22-CU-07), NCUA explained it does not prohibit credit unions from “developing, procuring, or using” DLT, provided that “permissible activities and in compliance with all applicable laws and regulations, including applicable state laws or state supervisory authority requirements.”
The agency wrote that it recognizes new technologies may transform how credit unions perform traditional financial offerings, but it advised credit unions to be alert to new or evolving risks posed by use of an emerging technology or approach.
“The NCUA expects credit unions to exercise good judgment and apply sound risk-management practices when choosing to offer a new platform, product, or service, including where DLT is part of the underlying technology,” the letter states. “These reviews include evaluating the permissibility of the activity itself and the opportunities and risks associated with any underlying technology, such as DLT.”
According to NCUA, the agency will begin evaluations related to DLT based on the “rigor with which credit unions exercised good judgment, applied sound risk management, and executed compliance and risk oversight of acquisition or development and deployment of new systems and technology.”
Other Points Raised
The letter additionally:
- Addresses governance, oversight and planning approaches for credit union boards to consider when employing DLT.
- Offers risk and risk mitigation strategies for credit unions to consider (including information and cybersecurity, legal and compliance, strategic and reputation, liquidity, and third-party risks).
“The NCUA supports innovations that are safe and sound, in compliance with all applicable laws and regulations, and fair to consumers,” NCUA said. “The NCUA also believes that DLT-related activities are rapidly evolving, and present questions and evolving risks not yet well understood. The NCUA reserves the right to issue future guidance, as appropriate.”