What Should Credit Unions Know About Stablecoins?

 

Congress is considering new legislation around cryptocurrency, and these new tools could have profound implications for the industry.

Andrew Lepczyk
Creditunions.com

Cryptocurrency is seemingly everywhere in 2025, including member’s virtual “wallets.” A 2022 study from CUNA – now known as America’s Credit Unions – found cryptocurrency ownership among credit union members stood at 39%, as opposed to 17% of the general population. In some ways this makes sense; many Americans who feel excluded from the traditional financial system are drawn to cryptocurrency, mirroring the relationship many members have with their credit union.

While there are plenty of enthusiasts, cryptocurrency also has its detractors. Many dismiss crypto ownership as speculative, and cryptocurrency as nothing more than an overly risky, volatile asset. Public failures of companies like FTX have only made the critics louder. A recent study from the Pew Research Center found 63% of respondents are not confident cryptocurrency is either reliable or safe.

But as the years have passed and ownership rates have remained steady at 17%, financial institutions have received the green light from regulators to engage in crypto-related activities. In other words, it is increasingly clear that cryptocurrency is a presence in the U.S. financial system. As a result, a few credit unions have begun allowing crypto wallets into their digital banking platforms, via third-party channels.

What are Stablecoins?

Volatility remains one of the major impediments to widespread cryptocurrency adoption. Why use or accept Bitcoin for a transaction if the price may rise or fall substantially in a short period of time?

Enter the stablecoin.

Stablecoins are a type of cryptocurrency designed to be pegged to a reserve asset, such as the U.S. dollar or Treasury securities – something that could be easily redeemed at par value. The purpose, unlike volatile cryptocurrencies like Bitcoin, is to be stable.  A dollar today is worth a dollar tomorrow, which can make buying and selling with cryptocurrency smoother, as it adds predictability to transactions.

As of June 18th, stablecoins were collectively worth $251.7 billion, according to a report from Reuters.

For cryptocurrency users, holding stablecoins means a reorientation away from traditional financial institutions and toward the crypto wallet.

Imagine a consumer who wants to sell some of their Bitcoin and use the funds to make a purchase from a retail store. Previously, that consumer need to convert those holdings into cash, which would mean deposit inflows into traditional financial institutions like banks or credit unions. With stablecoins, all of this can be done within the digital wallet. Keeping transactions within the cryptoverse also speeds up the settlement process, making payments instantaneous.

Within this “one-stop-shop” crypto wallet, major retailers such as Wal-Mart and Amazon have recently announced they’re looking to create their own stablecoins, pending the passage of the GENIUS Act. (The legislation has passed the Senate but awaits passage in the House). Allowing retailers to issue their own stablecoin means a crypto user could sell Bitcoin, for example, and immediately transfer the proceeds into a hypothetical “Amazon coin” to use shopping online at Amazon, for example.

One provision of the GENIUS Act would, if passed, allow federally insured financial institutions or companies themselves to issue stablecoins. Companies with less than $10 billion worth of coins would be regulated at the state level, while those above $10 billion would be overseen federally. The act requires issuers to hold $1 of liquid assets – U.S. Treasury securities, for example – for each dollar of stablecoins distributed.

Impact on the Credit Union Business Model

If at least 39% of members do indeed own cryptocurrency, as the CUNA study indicates, this shift could have implications for the credit union industry. If major retailers begin accepting stablecoins, there is little reason for more crypto-inclined members to leave the digital wallet. The disintermediation between credit union, consumer, and retailer could slow share growth, as fewer connections outside the digital wallet means less need for checking or savings accounts.

This has implications beyond shares. For credit unions that rely on interchange income, this one-stop-shop of retailer stablecoins inside a wallet would not only dent the earnings of major card issuers, but credit unions as well. When members use stablecoins, as envisioned by crypto proponents, they bypass the mechanisms that drive interchange income for traditional financial services providers.

New Risks

Stablecoins pose a risk to credit unions that goes beyond just earnings. When oversight is limited, stablecoins have shown to be less stable than advertised. During the 2023 Silicon Valley Bank crisis, the stablecoin USDC, issued by Circle, experienced a “flight to safety” as owners of USDC redeemed $2 billion 24-hour span, dropping the cryptocurrency’s value to just 87 cents.  Without proper regulatory oversight ensuring the 1-to-1 convertibility, both buyers and sellers will be more hesitant to use stablecoins.

There are also risks associated with compliance and reputation. Cryptocurrency has been used in the past for illicit purposes. Know Your Customer requirements run up against the anonymity that cryptocurrency promises. How will that balance be made with respect to your credit union? Policymakers in Washington are currently working to sort this out. In the meantime, credit unions should take note and assess how much they want to wade into the opportunities stablecoins offer, given the risks.

New Opportunities

It’s not all doom and gloom for credit unions. If the GENIUS Act is signed into law, credit unions could issue their own stablecoins, helping facilitate their members’ transactions and bringing the risk of disintermediation under control.

Issuing their own stablecoins will be the likely way large banks embed themselves in this financial technology. For credit unions, it may be more realistic to partner with a vendor who can provide the credit union with a stablecoin they can embed within their digital banking app.

Leaning into stablecoins or cryptocurrency more generally can be a way to expose new audiences to the credit union mission. While rates of cryptocurrency ownership among credit union members skew higher, there is still a perception that the industry lags when it comes to financial innovation. This could be an opportunity to show otherwise. It’s also a chance to provide worthwhile financial education ahead of members participating in a riskier asset class.