NASCUS Issues Comments to NCUA on Digital Assets and Related Technologies as well as Subordinated Debt 

October 29, 2021


NASCUS Issues Comments to NCUA on Digital Assets and Related Technologies as well as Subordinated Debt

NASCUS has submitted two comment letters this week to the National Credit Union Administration (NCUA) outlining potential impacts and improvements to proposed rules on Digital Assets and Subordinated Debt.

As it applies to digital assets and related technologies, NASCUS believes that the decentralized finance (DeFi) ecosystem presents numerous opportunities and challenges for credit union system stakeholders, consumers, and regulators. NASCUS maintains the best and the safest path forward is within regulated and trusted incumbent banking and credit union systems.

NASCUS applauds the NCUA for developing an “understanding of DeFi, the emerging technologies, and how credit union stakeholders have engaged with digital assets and emerging DeFi ecosystem” but strongly recommends proactive engagement to ensure a consistent and collaborative approach. Coordination with state and federal regulators on decentralized finance (DeFi) and other emerging digital asset use is essential to avoid conflicting rules and confusion.

Additionally, NASCUS recommends a narrow focus on “material financial safety and soundness risks with respect to federally insured state credit unions (FISCUs) and defer to state law regarding the permissibility of FISCU activities in this space. So doing will ensure the most vibrant innovation for credit union engagement in DeFi by leveraging the power of the dual chartering system.

Addressing comments on subordinated debt, NASCUS supports additional changes to the subordinated debt rule to “maximize ECIP benefits to low-income credit unions (LICUs) and further reduce regulatory burden.” The proposed amendment is necessary to permit LICUs to participate in the Treasury Department’s Emergency Capital Investment Program (ECIP) without reapplying for capital treatment after the subordinated debt rule takes effect in 2022.

The proposed changes will alleviate regulatory burden and improve the prospects of LICUs seeking to participate in the ECIP. However, NASCUS remains concerned that the proposed changes fall short of what could be done to allow for a robust flow of ECIP benefits through LICUs to their communities. Furthermore, additional evaluation is encouraged to determine if the Subordinated Debt rule is calibrated correctly with the distinct features not to impede the vital work done by these credit unions.

In general, the NCUA’s subordinated debt rule should provide for automatic exceptions to accommodate the terms of subsequent emergency government programs. Given the lingering effects of the pandemic, it is likely there could be additional Treasury Department funding programs, and the NCUA should provide certainty that credit unions will have an equal opportunity to participate. A basic sunset provision could provide compatibility between the Subordinated Debt rule and qualifying government funding program rules.

The copies of both NASCUS comment letters are available on the NASCUS website at:

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