United States: NCUA provides advice on third party digital asset service providers
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The National Credit Union Administration (“NCUA”) provided advice clarify permitted activities and obligations with respect to the relationship between federally insured credit unions (“FICUs”) and third-party digital asset service providers. In a letter to credit unions, the NCUA said the guidelines aim to provide assistance to FICUs, bringing together vendors and members so parties can “negotiate and consume transactions and other services related to digital assets. “.
Based on comments received from an NCUA request for information in July 2021, the NCUA clarified that FICUs are not prohibited from partnering with third-party digital asset service providers that enable to FICU members “to buy, sell and hold uninsured digital assets with the third party vendor outside of the FICU.” The NCUA said that the FICUs “should fully assess the risks associated with digital asset activities , including legal risks, reputational risks and economic risks. ”The NCUA has stated that it expects FICUs (i) to exercise due diligence, (ii) to ensure compliance with laws on consumer protection, investor protection and anti-money laundering / terrorist financing, and (iii) ensure adequate cybersecurity.
The NCUA urged the FICUs to assess their policies, procedures and agreements regarding the third party provision of digital asset services to ensure appropriate internal controls and compliance with applicable law. The NCUA also said that FICUs should clearly disclose – when selling, advertising or marketing uninsured digital assets to members – that the products offered (i) are not federally insured, ( ii) are not FICU bonds, (iii) are not guaranteed by the FICU, (iv) may be highly speculative and volatile, (v) may have associated costs, (vi) may not allow recourse to members and (vii) be offered by a third party.
The NCUA added that it will provide additional guidance on rapidly evolving issues involving digital assets and distributed ledger technologies.
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