What Is the NCUA Proposing?
The National Credit Union Administration has published its first proposed rules under the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, outlining how subsidiaries of federally insured credit unions could apply to become federally supervised payment stablecoin issuers.
The agency oversees more than 4,000 federally insured credit unions serving about 144 million members and managing roughly $2.38 trillion in assets as of mid-2025. The proposal sets out the licensing process and supervisory framework for what it calls permitted payment stablecoin issuers, or PPSIs.
Under the draft, any payment stablecoin issuer that is a “subsidiary of an insured credit union” would need to obtain an NCUA PPSI license before issuing coins. Federally insured credit unions would also be barred from investing in or lending to stablecoin issuers that do not hold that license.
The current proposal focuses narrowly on licensing mechanics and investment restrictions. A separate rulemaking will address operational standards tied to reserves, capital, liquidity, illicit finance controls, and technology risk.
“A forthcoming proposal will propose regulations to implement the standards and restrictions imposed by the GENIUS Act on PPSIs,” the preamble states.
Investor Takeaway
Why Must Credit Unions Use Subsidiaries?
The GENIUS Act requires insured depository institutions, including credit unions, to issue payment stablecoins through separately supervised subsidiaries rather than directly from the parent balance sheet. For credit unions, that typically means using credit union service organizations or other qualifying entities that fall under NCUA oversight as subsidiaries.
This structure keeps stablecoin activity ring-fenced from core deposit-taking operations while subjecting the issuing entity to a defined federal supervisory regime. The proposal clarifies that no payment stablecoin can be issued by a qualifying subsidiary without first receiving PPSI approval.
Until additional standards are finalized, any rollout of stablecoin services to members would depend on future approvals and compliance with forthcoming requirements.
What Do the 120-Day Clock and Blockchain Clause Mean?
Two provisions in the draft stand out for the broader digital asset market. First, the NCUA would be prohibited from denying a substantially complete application solely because a stablecoin is issued “on an open, public, or decentralized network.” That language prevents the agency from rejecting an application simply due to the use of a public blockchain.
Second, once an application is deemed “substantially complete,” the agency would have 120 days to approve or deny it. If the NCUA fails to act within that window, the application would be “deemed approved” by default.
Together, those provisions create a defined timeline and limit discretionary rejection based only on blockchain design. They do not eliminate supervisory review, but they constrain how the review can be conducted.
Investor Takeaway
What Happens Next?
The document is a notice of proposed rulemaking, not a final rule. Stakeholders will have 60 days from publication in the Federal Register to submit comments before the NCUA can revise or finalize the framework.
Further rulemaking is expected to implement the GENIUS Act’s standards on reserves, capital buffers, liquidity management, anti-money-laundering controls, and information technology risk. Those requirements will determine how capital-intensive and operationally demanding stablecoin issuance becomes for credit union-linked entities.
For now, the proposal establishes the licensing architecture and sets the boundaries for who may issue payment stablecoins within the credit union system. The broader policy debate over how stablecoins interact with deposits, bank funding, and shadow liquidity will depend on the next round of rules.
