NAFCU Urges U.S. Treasury to Work With NCUA On Digital Asset Development
The association does not want to see new credit union regulation that would hamper technological innovation.
In March, President Joe Biden signed an Executive Order on Ensuring Responsible Development of Digital Assets to outline an approach to address the risks and benefits of digital assets and the underlying technology.
Biden has been criticized that this approach of using an Executive Order means the government is going at this issue alone. In a letter to the Treasury Department on Thursday, NAFCU Regulatory Affairs Counsel Dale Baker noted that there’s no need to “go at it largely alone,” and there should be efforts made to work with the NCUA “to ensure it does not deter responsible technological innovation or unnecessarily burden the already well-regulated credit union system as it strives to detect, disrupt and deter criminals’ misuse of digital assets and related technologies.”
According to NAFCU, the letter highlighted the differences between intermediated digital-assets-related finance applications and activities, like those engaged in by some credit unions, and truly decentralized digital-asset-related finance applications specifically designed to enable users to interact and transact with one another without any intermediary’s involvement.
The government and Wall Street watchdog organization Better Markets filed its own letter to the Treasury Department to argue for more controls over financial institutions that are providing digital asset products and services.
“An increased usage of crypto assets by consumers and businesses could undermine the banking system by draining banks of deposit funding and loan demand,” the letter stated. “Ultimately, if this were to happen, it could reduce the provision of credit to our economy, make that credit more expensive, and increase overall systemic risks. Additionally, the level of risks for crypto asset companies and activities inherently are much higher due to the nature and design of crypto assets, which compounds and complicates risks.”
The Treasury Department expects to publish its official risk assessment of digital asset development by Feb. 24, 2023.