Banking and Finance Law Daily Wrap Up, FINANCIAL TECHNOLOGY—Better Markets urges caution on NCUA stablecoin regulation, (Jul 21, 2026)

By Steven Melendez

The group warned the proposal could lead to risks to federally insured credit unions and their members.

A National Credit Union Administration (NCUA) proposal for regulating stablecoins under the Guiding and Establishing National Innovation for U.S. Stablecoins Act (the GENIUS Act) lacks sufficient capital and liquidity standards or reverse diversification requirements and may not be enough to prevent risks to credit union health and financial stability, Better Markets warned in a comment letter.

“Those shortcomings increase the likelihood that stress involving stablecoins issued by credit unions will spread throughout the financial system and harm everyday Americans,” said Christopher Appel, director of banking policy at Better Markets.

The NCUA issued a proposed rule in May 2026 to implement GENIUS Act standards for permitted payment stablecoin issuers (PPSIs) under its jurisdiction. Other financial regulators, including the Office of the Comptroller of the Currency, Treasury Department, and Federal Deposit Insurance Corporation, have also issued their own proposals for incorporating stablecoins—digital tokens often pegged in value to the U.S. dollar—into institutions under their regulatory umbrellas. Better Markets argued those proposals all suffer from similar issues and that the agencies have failed to sufficiently coordinate with each other before issuing proposals.

Additionally, the group warned, the NCUA is operating with a single board member, “lost 23 percent of its workforce through voluntary separations in 2025,” and has not addressed how it will take on new regulatory challenges around stablecoins with its current capacity.

Systemic risk. The NCUA proposal envisions and authorizes an ownership structure where numerous credit unions share ownership interests in a single stablecoin issuer, but it fails to “attempt to analyze the systemic risk this model creates for the credit union system and the National Credit Union Share Insurance Fund,” Better Markets warned.

Problems with such an issuer could cause harm across the credit union system and represent a shock to the Share Insurance Fund. The Fund’s equity ratio was designed to handle individual credit union failures rather than a common shock affecting many institutions at once, according to Better Markets. The group recommended the NCUA consider limits on the number of credit unions that can invest in one stablecoin issuer or the aggregate investment of the credit union system as a whole.

Additionally, the proposed rule fails to consider “step-in risk,” meaning the likelihood that credit union managers will step in with financial commitments to address problems with an affiliated stablecoin issuer rather than risk losses to its members. This can particularly be an issue if multiple credit unions affiliated with one issuer do so simultaneously, according to Better Markets.

The proposal also permits stablecoin issuers to hold reserve assets in share accounts at credit unions that are investors in the issuers themselves, creating potential conflicts, the group said. Better Markets recommended the NCUA ban the practice or impose strict limits and conflict-of-interest requirements.

Supervisory discretion. Better Markets also argued the proposal, like the proposals of other financial regulators, relies too much on supervisory discretion “with a de minimis capital floor” rather than strict minimum standards. The organization compares stablecoins to money market mutual funds, which required government assistance in 2008 and in March 2020. The stablecoin industry could see similar issues, Better Markets warns.

Reserve asset classes allowed by the GENIUS ACT, “including uninsured deposits, money market fund shares, and repurchase agreements,” have all had their own previous liquidity issues, the group says, arguing the NCUA should require specific, mandatory concentration limits for various asset classes. Standards should also take into account the fact that holders can submit redemption requests at any time, rather than during banking hours, and that “stablecoin redemption structures reward those who run first, which creates a self-reinforcing dynamic once any doubt about reserve quality emerges.”

Interagency coordination. The GENIUS Act requires that regulatory agencies coordinate in developing regulations, but Better Markets argues such coordination “has not occurred in any meaningful way.” The lack of coordination will lead to regulatory gaps that require subsequent intervention, according to Better Markets.

A comment letter from banking industry groups, including the American Bankers Association, Independent Community Bankers of America, Consumer Bankers Association, and the Bank Policy Institute, also recently sent a letter to the NCUA calling for greater consistency between the various regulators, warning of the risk of “opportunities for regulatory arbitrage, unintended policy consequences, or unworkable or incongruous requirements” (see Banking and Finance Law Daily, Jul. 20, 2026).

Companies: American Bankers Association; Bank Policy Institute; Better Markets; Consumer Bankers Association; Independent Community Bankers of America

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