The departure of SoFi from the cryptocurrency sector seems to be a long-awaited decision.
SoFi, the digital personal finance company, has announced its decision to exit the cryptocurrency sector in December 2022, citing regulatory uncertainty as the primary reason. The move comes after the company obtained its national bank charter from the Office of the Comptroller of the Currency (OCC) in January 2022, which introduced heightened regulatory scrutiny and unclear rules for crypto services.
The regulatory pressure stemmed from the lack of clear federal guidelines for banks offering cryptocurrency products, which put SoFi's newly chartered banking operations at risk of non-compliance or regulatory issues. As a newly chartered bank, SoFi had to prioritize regulatory compliance and risk management under banking regulators who have been cautious about crypto-related activities.
However, recent developments suggest that SoFi is planning to reintroduce cryptocurrency trading to its platform, thanks to updated regulatory guidance. The company's crypto offerings were subject to a two-year conformance period from the date it became a bank holding company, as per the conditions of the bank charter approval.
SoFi customers have until December 19 to transfer their funds to Blockchain.com before the company's crypto offerings are shut down. The company's crypto-related fees were a small portion of its overall earnings, suggesting that the company did not rely heavily on cryptocurrency for revenue.
The decision to exit the cryptocurrency sector may have been influenced by the conditions of the bank charter approval received in January 2022. The approval stipulated that the company must receive necessary regulatory approvals for its crypto business or exit the sector. Among the restrictions floated by the SEC was a requirement for firms to maintain in-house custody of digital assets owned by their customers.
The potential requirement for in-house custody of digital assets owned by customers could be a challenge for other cryptocurrency businesses. SoFi's departure from the cryptocurrency business is scheduled within a couple of weeks.
SoFi was a high-profile player in the cryptocurrency industry, hosting events such as Bitcoin Miami. The company's aggressive growth stance, fueled by the bank charter, had been a significant factor in its rapid expansion. However, the regulatory uncertainty surrounding cryptocurrency services has forced SoFi to reconsider its approach.
In August, SoFi warned of growing caution regarding the SEC's scrutiny of digital assets. The Fed's crypto requirements were expected to grow stricter over time, according to SoFi. The company's mention of being "forced to cease trading in certain types of assets" due to the SEC's scrutiny underscores the challenges faced by cryptocurrency businesses in navigating the complex regulatory landscape.
Despite exiting the cryptocurrency sector, SoFi's decision does not necessarily mean it will cease all digital asset-related offerings during the two-year conformance period. The company's focus remains on providing innovative financial solutions to its customers, and it will continue to explore opportunities in the digital asset space as regulatory clarity emerges.
SoFi's decision to exit the cryptocurrency sector in December 2022 was primarily driven by regulatory uncertainty, as the company prioritized regulatory compliance and risk management as a newly chartered bank. However, recent developments suggest that SoFi may reintroduce cryptocurrency trading to its platform, reflecting the company's ongoing interest in exploring opportunities in the digital asset space.
