Credit unions are looking for approval to hold digital assets directly after regulators said they can provide cryptocurrency services to customers by partnering with third parties.
National Credit Union Administration said in a letter published last week that credit unions with federally insured deposits can team up with third-party crypto service providers to allow their members to buy, sell, and hold digital assets, Bloomberg reported, provided certain conditions are met.
“In light of the rapidly changing technological environment and the variety of digital asset products and services available,” the administration said, “FICUs should actively monitor that they, and the third-party service providers they facilitate member relationships with, remain in ongoing compliance with all laws.”
Ultimately credit unions would like to be able to offer those products and services directly in the same way that banks can, Lance Noggle, senior director of advocacy for payments and cybersecurity at the Credit Union National Association.
The Office of the Comptroller of the Currency, which regulates national banks, in July 2020 gave banks approval to offer custody services for cryptocurrency.
The agency recently said they must first get written permission from their supervisory office.
Without similar guidance, credit unions risk losing members to banks and seeing their industry “start to shrivel” because they can’t offer financial products and services that people want, Noggle said.
However, even if more financial institutions get permission to offer those services, some may decide the task is too complex and stick with specialized crypto providers.
Custody of Bitcoin and other digital assets isn’t the same as traditional assets, said Christian Catalini, the founder of the MIT Cryptoeconomics Lab.
“If you’re custodying Bitcoin and somebody steals those Bitcoins, it’s much harder to claim them back,” he said.