SoFi Technologies, a diversified financial services provider, has made a significant move away from the cryptocurrency sector. Amid a surge in token prices and heightened regulatory scrutiny, the San Francisco-based company informed its crypto customers that it would be closing their accounts in the coming weeks.
This decision marks a pivotal shift for SoFi, which had expanded its offerings into the digital asset space alongside a broad spectrum of financial services.
Regulatory Scrutiny and Strategic Shift
SoFi’s decision to exit crypto is largely attributed to the increasing attention the sector is receiving from banking regulators. The Federal Reserve, Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency have raised concerns about the volatile nature of digital assets.
In January, watchdogs denied a crypto firm’s application to become a member of the Federal Reserve, mirroring SoFi’s strategic reorientation.
This move comes as part of a compliance requirement with its bank charter, received in January 2022, which stipulated a two-year conformance period for its crypto business.
The company, which initially entered the crypto space in 2019, had to choose between securing the necessary regulatory approvals for its digital asset sector or exiting it. SoFi’s choice to exit reflects the challenging regulatory environment facing financial institutions in the crypto industry.
SoFi’s Crypto Journey and Future Plans
Starting as a student-lending refinancing company 12 years ago, SoFi had grown into a multi-faceted financial powerhouse, hosting events like Bitcoin Miami and engaging actively in the crypto market.
However, crypto operations constituted a non-material part of SoFi’s business, with brokerage-related fees, including crypto, totaling about $6 million in the three months ended September 30.
SoFi’s digital asset holdings stood at $139.4 million as of September 30, against a backdrop of an expected $2 billion in revenue this year. The company’s pivot away from crypto involves transitioning its customers to Blockchain.com for their digital asset needs.
As of December 19, any remaining crypto balances in SoFi accounts will be liquidated if not moved to Blockchain.com. Blockchain.com, a veteran in the crypto industry since 2011, operates a popular crypto exchange and wallet service.
The company has created 87 million wallets and facilitates a third of Bitcoin network transactions. Despite challenges, including exposure to the collapse of the Three Arrows Capital hedge fund and staff layoffs, Blockchain.com recently secured a $110 million funding round led by Kingsway Capital.
SoFi’s withdrawal from the cryptocurrency market represents a notable shift in the financial industry’s approach to digital assets. Faced with regulatory challenges and the need to focus on its core banking operations, this decision underscores the complexities and risks associated with operating in the volatile crypto market.
For SoFi, this exit marks the end of its direct involvement in cryptocurrency trading and investment, aligning its operations more closely with traditional banking practices.
While SoFi will continue to refer its members to other crypto partners next year, its own journey in the crypto space has come to a close, reflecting the broader uncertainties and regulatory hurdles that continue to shape the landscape of digital finance.
