NCUA Proposes Rules for Credit Union Payment Stablecoin Issuers
By Matt Hagen, JD, CRCM, CAMS - Senior Compliance Manager, Financial Institutions Group
The National Credit Union Administration (NCUA) has published its proposed rule implementing the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act). The proposed rule published in the Federal Register on Feb. 12, 2026, lays out a framework for licensing and supervising payment stablecoin issuers that are subsidiaries of federally insured credit unions (FICUs).
An Approach Tailored to Credit Unions
As noted during Doeren Mayhew’s Compliance in a Crypto Era: Navigating GENIUS Act and Stablecoin webcast, depository institutions cannot directly issue stablecoins under the GENIUS Act; they must do so through subsidiaries. For credit unions, this means utilizing credit union service organizations (CUSOs) or other qualifying subsidiary structures.
Federal credit union (FCU) subsidiaries seeking permitted payment stablecoin issuer (PPSI) licenses must qualify as CUSOs under Part 712 of NCUA regulations. This reflects the agency’s interpretation that investment authority under Section 107(7)(I) of the Federal Credit Union Act and CUSO provisions under Section 107(5)(D) refer to identical entities. Therefore, FCU investments in PPSIs are subject to the statutory 1% capital limitation on CUSO investments. It is worth noting, the NCUA is soliciting comment on whether it should reconsider this assessment, which could potentially expand the types of organizations FCUs may invest in for stablecoin issuance.
While this may constrain individual FCU participation, and recognizing that CUSOs are often jointly owned by multiple institutions, the NCUA proposes the subsidiary itself apply jointly with its “parent company” credit union(s). Under the proposed rule, a parent company is defined as any FICU that owns, controls or holds the power to vote 10% or more of any class of voting securities in a PPSI. If no single FICU owns 10% or more, the FICU with the largest ownership stake becomes the parent company.
Compliance in a Crypto Era: Navigating GENIUS Act and Stablecoin
Investment Limitations
The proposed rule restricts FICUs to investing only in NCUA-licensed PPSIs. The NCUA acknowledges this approach creates potential coordination challenges if credit unions wish to invest in PPSIs already licensed by other regulators. The NCUA board is specifically requesting comments on how to address scenarios where credit unions seek exposure to the stablecoin market through entities with existing federal licenses from other agencies.
Additionally, the proposed rule establishes a 60-day prior notice requirement for any credit union acquisition that would make it a new parent company of an existing NCUA-licensed PPSI. This change-in-control provision allows the NCUA to evaluate whether the acquiring credit union’s officers and directors possess the necessary competence, experience and integrity. The NCUA may disapprove such acquisitions if they would not be in the best interests of the PPSI or the public.
Application Requirements
The GENIUS Act also imposes a 120-day decision timeline for consideration of “substantially complete” applications. The NCUA’s proposed rule provides specific guidance on what constitutes a “substantially complete” application, including:
Comprehensive Business Plans: The business plan must demonstrate financial stability, realistic capital and liquidity projections, and sound risk management practices. It must address earnings prospects, management qualifications, operational capabilities, redemption policies and compliance readiness. The NCUA is developing a Payment Stablecoin Issuer Manual to provide detailed guidance and model templates.
Biographical and Financial Reports: All directors and officers of the applying issuer, its parent company credit unions and any principal shareholders (those owning 10% or more) must complete the NCUA’s Biographical and Financial Report. Directors and officers of the applying issuer must also submit fingerprints for criminal background checks to verify compliance with the GENIUS Act’s prohibition on certain felony convictions.
Written Certifications: The applying issuer, all parent company credit unions and any principal shareholders must certify in writing that their application contains no material misrepresentations or omissions, subject to criminal penalties under 18 U.S.C. 1001.
Five Statutory Evaluation Factors
The proposed rule also provides additional policy considerations for each of the five statutory factors federal regulators are directed to consider when evaluating applications:
- Financial Condition and Resources: The applicant must demonstrate the ability to maintain one-to-one reserve backing using approved assets.
- Prohibited Felony Convictions: The NCUA must verify no officer or director has been convicted of felonies involving insider trading, embezzlement, cybercrime, money laundering, terrorism financing or financial fraud.
- Competence, Experience, and Integrity: Officers, directors and principal shareholders must demonstrate competence and experience relevant to payment stablecoin operations, a strong compliance record and the ability to fulfill commitments and conditions imposed by the NCUA.
- Redemption Policy Standards: The issuer must publicly disclose clear procedures for timely redemption and all associated fees.
- Safety and Soundness: The NCUA will assess whether the issuer can operate safely and soundly, including the capability to comply with lawful orders to freeze, seize or block stablecoins, and maintain robust operational, compliance and information technology risk management.
NCUA Examination and Supervision
The GENIUS Act grants the NCUA examination and enforcement authority over NCUA-licensed PPSIs, representing a significant expansion of the agency’s supervisory reach. The NCUA is updating its National Supervision Policy Manual and Examiner’s Guide to accommodate oversight of these entities.
Critical Questions for Stakeholder Input
The NCUA has posed numerous questions to stakeholders throughout the proposal. Questions include:
- Is 10% the appropriate ownership threshold for parent company designation, or would 25% better balance oversight with efficiency?
- Should the NCUA reconsider its interpretation that FCU subsidiaries must qualify as CUSOs?
- Should the agency impose licensing or examination fees to offset administration costs, or should these costs be absorbed by all credit unions through the existing budget process?
- What specific technological capabilities and documentation should applicants provide regarding reserve management, transaction monitoring, cybersecurity and operational resilience?
- Should audited financial statements be required as part of initial applications?
- Should non-credit union investors be permitted in NCUA-licensed PPSIs, and if so, should there be caps on such investments?
Implementation Timeline
Comments on the proposed rule are due by April 3, 2026. This compressed timeline reflects the GENIUS Act’s requirement that the NCUA issue final implementing regulations by July 18, 2026.
Looking Ahead: Phase Two Standards
This proposed rule represents only the first phase of NCUA’s GENIUS Act implementation. The agency has announced plans for a forthcoming proposal to establish operational standards for NCUA-licensed PPSIs, including:
- Specific reserve composition and diversification requirements.
- Capital adequacy standards tailored to stablecoin issuer business models.
- Liquidity management and stress testing protocols.
- Detailed redemption policy requirements.
- Information technology risk management standards specific to blockchain and distributed ledger systems.
Implications for Credit Unions
For credit unions considering stablecoin participation, preparation should begin now. Understanding the application requirements, building management expertise in digital assets and blockchain technology, and developing relationships with technology vendors and compliance partners will all take time.
Looking for clarity on the compliance requirements surrounding stablecoin? If you weren’t able to attend Doeren Mayhew’s Compliance in a Crypto Era: Navigating GENIUS Act and Stablecoin you can view it now on-demand.
