SoFi’s departure from the cryptocurrency business, effective within a couple of weeks, may seem abrupt, but it has been a long time coming. The digital personal finance company first offered crypto trading in 2019, but that was under a two-year conditional approval granted by the Federal Reserve—and it was never certain that SoFi’s crypto business would extend beyond that.
This announcement has perhaps been inevitable since SoFi received a bank charter in January 2022. That move was part of an aggressive growth stance that has fueled the rapid expansion of SoFi, which is still barely a decade old.
According to the conditions of the charter approval, SoFi either had to receive necessary regulatory approvals for its crypto business or it would exit the sector. “[T]he Bank Holding Company Act permits us to continue our current digital assets related offering for a two-year conformance period from the date we became a bank holding company,” the filing said.
More Catalysts for the Exit
For a while, SoFi was a high-profile player in crypto, hosting an event at Bitcoin Miami as recently as last year. Although the company let users buy and sell more than 20 crypto currencies— including bitcoin, dogecoin and Ethereum, crypto never became a significant part of its business. Its brokerage-related fees, including all crypto-related fees, totaled $6 million in Q3, according to SoFi’s financial statements.
Regulatory pressures have kept the business on thin ice for a while. The immediate catalyst for this move is the Federal Reserve’s novel activities program, which was introduced over the summer. Given the new strictures, SoFi began to suspect its crypto business would never be fully approved by the Fed. The fintech also expected the Fed’s crypto requirements to grow stricter over time.
Then in August, SoFi warned that it had grown increasingly cautious of the Security and Exchange Commission’s scrutiny of digital assets. Among the restrictions floated by the SEC was a requirement that firms maintain in-house custody of digital assets owned by their customers. SoFi went so far as to mention the possibility of being “forced to cease trading in certain types of assets.”
That warning came to fruition this week. SoFi customers have until December 19 to transfer their funds to Blockchain.com.
