Yesterday, America’s Credit Unions (ACU) sent a letter to the NCUA in response to the regulators’ new proposed rule on stablecoins, following the passing of the GENIUS Act. The rule is meant to develop a framework for credit unions to apply for and begin issuing stablecoins through the NCUA, as required by law under the GENIUS Act. The rule makes it clear that, per the GENIUS Act, credit unions are prohibited from directly issuing stablecoins themselves. Instead, they must issue them through FICU subsidiaries that receive an NCUA-PPSI (permitted payment stablecoin issuers) license.

In its letter, ACU recommended a few changes to the rule, including allowing credit unions to invest in and form non-CUSO PPSIs. ACU suggests this is a necessary step, as credit unions are not permitted to directly issue stablecoins and will therefore need to form relationships with PPSIs.

“When the GENIUS Act was drafted, Congress was aware that a CUSO’s unique structural characteristics might not be ideal for a PPSI…For a PPSI hoping to achieve the scale necessary to compete with globally dominant stablecoin incumbents, it would be unrealistic to impose an arbitrary upper limit on the number of nonmember stablecoin holders as a precondition for credit union investment. These challenges were understood by Congress as warranting an additional subsidiary option distinct from a CUSO but still associated with the routine operations of a credit union,” wrote ACU Director of Innovation and Technology, Andrew Morris. “Requiring FCU PPSIs to form as CUSOs would negatively impact their competitive viability, particularly in relation to bank-owned PPSIs which will possess greater flexibility in terms of subsidiary structure. Accordingly, we urge the NCUA to align its proposed rule with the intent of Congress and permit FCUs to establish PPSI subsidiaries through both CUSO and non-CUSO entities.”

Additionally, ACU recommends:

• Clarifying that PPSI reserves pledged by owner credit unions would not count against the 1% cap applicable to CUSO investments;
• Addressing the NCUA’s expectations for credit unions that engage in custodial activities but do not plan to issue a permitted payment stablecoin; and
• Offering additional regulatory guidance on mixed-ownership PPSIs, corporate credit union roles, and coordination with other federal regulators.

The cutoff for comments on the proposed rule passed this week. Under the law, the NCUA is legally required to implement these regulations by July 18th of this year, so any changes made to the rule will be made and implemented quickly.

“This proposed rule is the first step in NCUA’s implementation of the GENIUS Act” said NCUA Chairman Kyle Hauptman. “We’re on track to meet the Congress’ July 18 deadline. Credit unions should be aware that they won’t be at a disadvantage versus other entities, whether in timing or standards.”