Earlier this year, on May 18, the National Credit Union Administration (NCUA) Board published its second notice of proposed rulemaking implementing the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act). The proposal sets operating standards for permitted payment stablecoin issuers (PPSIs) that are subsidiaries of federally insured credit unions and updates the NCUA’s share insurance and capital rules.

Key Takeaways

• Federally insured credit unions cannot issue stablecoins directly. Only a credit union subsidiary can hold the license.
• The NCUA holds exclusive federal jurisdiction over those subsidiaries. They cannot opt into a state track or qualify as a federal qualified issuer under the OCC framework.
• Reserves must back the stablecoin one-to-one in cash or qualifying liquid assets. The PPSI must disclose its redemption policy and publish reserve composition monthly. Rehypothecation is generally prohibited.
• Stablecoins are not federally guaranteed and are not covered by FDIC deposit insurance or NCUA share insurance. In an issuer insolvency, stablecoin holders rank ahead of other creditors.
• The NCUA reads tokenized share accounts as outside the “payment stablecoin” definition, leaving credit unions room to tokenize share products. The agency asks whether to write that exclusion expressly into the rule.

Who Can Issue

Credit unions cannot directly issue payment stablecoins. Only a subsidiary can hold the license. Eligible subsidiaries include credit union service organizations (CUSOs) in which the credit union has ownership or to which it has extended a loan, certain service organizations recognized under the Federal Credit Union Act, and subsidiaries of state-chartered insured credit unions. The NCUA holds exclusive federal jurisdiction over them. They cannot opt into a state track or qualify as a “federal qualified” issuer under the parallel OCC pathway.

Reserves, Redemption, and Disclosure

An NCUA-licensed PPSI would back its stablecoin one-to-one with U.S. currency and other specified liquid assets, publicly disclose its redemption policy, and publish reserve composition monthly. The proposal identifies qualifying assets, sets diversification and concentration limits, and bars using stablecoins as reserves. Rehypothecation is also prohibited. Reserve custody is restricted to qualifying financial institutions supervised by a primary federal payment stablecoin regulator, another primary federal financial regulator, or a state bank or credit union supervisor, with a written custody agreement required.

The proposal restates that GENIUS Act stablecoins are not federal obligations. They carry no government guarantee and are not covered by FDIC or NCUA insurance. In an issuer insolvency, however, stablecoin holders rank senior to other creditors.

Tokenized Share Accounts

The NCUA reads the GENIUS Act to leave tokenized share accounts outside the “payment stablecoin” definition, letting credit unions tokenize share products without becoming PPSIs. The agency does not codify that exclusion in the proposed rule text but asks commenters whether to do so. Conforming changes to the NCUA’s share insurance and corporate credit union rules would keep share-insurance treatment consistent across tokenized and traditional accounts.

Insider Transactions and Affiliate Controls

The proposal imports a framework for insider transactions modeled on Regulation O. “Insider” reaches officers, directors, principal shareholders at a ten-percent threshold, parent companies, related interests, and immediate family. The definitions track the parallel OCC stablecoin proposal, consistent with the NCUA’s objective of coordination across the primary federal payment stablecoin regulators.

Coordination With Other Regulators

This is the latest in a sequence of GENIUS Act rulemakings: Treasury’s advance notice in September 2025, the FDIC’s December 2025 proposal, the NCUA’s February 2026 licensing proposal, and the OCC’s March 2026 proposal. The NCUA is working to align its terminology and substantive standards with the other regulators. That alignment matters for banks evaluating reserve custody, joint product offerings, or correspondent relationships with credit union issuers. The definitions of qualifying custodian, insider, affiliate, and control now read consistently across the OCC and NCUA proposals.

What’s Next

The comment period closed July 17. The most consequential open questions remain whether the NCUA should write the tokenized-share-accounts exclusion expressly into the rule text rather than leaving it in the preamble, whether permissioned or semi-permissioned ledgers should qualify as “public” distributed ledgers, whether outstanding issuance value should aggregate non-consolidated affiliates, and whether self-executing GENIUS Act provisions should be codified for ease of reference.

The one-year statutory rulemaking window closed July 18, 2026, without final rules from the NCUA or any of the other primary federal payment stablecoin regulators. The GENIUS Act takes effect 120 days after those regulators finalize their rules, and in no event later than January 18, 2027. Unless final rules come quickly, that January backstop is now the date driving the effective-date math, and issuers should plan against it.