U.S. Credit Unions Adopt Tokenization of Real World Assets
Traditional banks may still dominate the financial industry in terms of assets held, but credit unions are becoming an increasingly popular option for Americans who qualify.
Recent data shows that there are roughly 4,600 credit unions in the United States. A September 2023 report from The National Credit Union Administration (NCUA) further notes that nearly 139 million Americans were members of federally insured credit unions, up 20% from five years prior.
In addition, the credit union market size measured by revenue totaled $126.2 billion last year.
John Wingate, Chief Executive of financial platform BankSocial, told Cryptonews that a credit union is a member owned bank.
“Unlike for profit banks that are owned by shareholders, credit unions are owned by the members, one member, one share, one vote,” said Wingate. “Given this, the credit union ethos and the decentralized fiance (DeFi) ethos are perfectly aligned.”
While this may be true, credit unions face a number of challenges that may hamper future growth.
Kyle Hauptman, Vice Chairman of the NCUA – an independent U.S. government agency that regulates federal credit unions – told Cryptonews that credit unions buy and sell pieces of loans.
“This is a clunky process called ‘loan participations,” said Hauptman.
A compliance blog from the National Association of Federally Insured Credit Unions explained that loan participation occurs whenever the ownership interests in a loan are divided up and sold.
“Under section 701.22, federally insured credit unions (FICUs) can buy participation interests in loans under certain conditions,” the blog states.
Hauptman pointed out that the current loan participation process can be complex. For example, he explained that if a
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