SoFi Technologies, a diversified financial services provider, is undergoing a shift away from the cryptocurrency sector.
In response to the heightened regulatory scrutiny, the San Francisco-based company has informed its crypto customers about the closure of their accounts.
This move marks a departure for SoFi, which had previously expanded its services into the digital asset space alongside a broad spectrum of financial offerings.
Regulation Spurs Strategic Shift
The decision to exit the crypto market is linked to the growing attention the sector is attracting from banking regulators.
Concerns raised by the Federal Reserve, Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency regarding the volatile nature of digital assets have influenced SoFi’s strategic reorientation.
Sofi Crypto Timeline
This shift is part of a compliance requirement with its bank charter, received in January 2022, which mandated a two-year conformance period for its crypto business.
SoFi, which initially entered the crypto space in 2019, faced a choice between obtaining regulatory approvals for its digital asset sector or exiting it.
The company’s decision to exit reflects the challenging regulatory environment confronting financial institutions in the crypto industry.
Despite entering the crypto market, SoFi’s crypto ventures were a minor aspect of its business, adding around $6 million in brokerage fees, including crypto, for the quarter ending on 30 September.
As of 30 September, SoFi’s digital asset holdings amounted to $139.4 million against an expected $2 billion in revenue for the year.
The company’s pivot away from crypto involves transitioning its customers to Blockchain.com for their digital asset needs.
Blockchain.com, since 2011, operates a popular crypto exchange and wallet service, boasting 87 million wallets and facilitating a third of Bitcoin network transactions.
Screenshot taken from SoFi’s website:
SoFi’s Crypto Market Impact
SoFi’s withdrawal from the cryptocurrency market signals a shift in the financial industry’s stance on digital assets.
Faced with regulatory challenges and the need to concentrate on core banking operations, this decision highlights the complexities and risks associated with operating in the volatile crypto market.
For SoFi, this exit signifies the conclusion of its direct involvement in cryptocurrency trading and investment, aligning its operations more closely with traditional banking practices.
While the company will continue to refer its members to other crypto partners next year, its own journey in the crypto space has come to a close.
This echoes the broader uncertainties and regulatory hurdles shaping the landscape of digital finance.