SoFi Halts Crypto Services: Important Information for Customers.SoFi is a platform where users can purchase and sell digital assets such as Bitcoin, Ethereum, and Litecoin. SoFi Technologies (SOFI) plans to close its cryptocurrency services by December 19. Existing account holders can either transfer to the Blockchain.com platform or opt for closure and liquidation, with a few conditions.
How does SoFi Crypto work?
SoFi Crypto offers a user-friendly mobile app for actively investing in cryptocurrencies. The services for buying and selling cryptocurrencies, including Bitcoin, Ethereum, Litecoin, Bitcoin Cash, and Ethereum Classic, are provided through SoFi Digital Assets, LLC.
With the app, you can:
- Buy and sell various cryptocurrencies.
- Trade cryptocurrencies 24/7 using the SoFi Invest app.
SoFi adds a markup of up to 1.25% on cryptocurrency transactions. This extra cost is included in the market price obtained from the exchange. For example, if Litecoin (LTC) is priced at $100 in the market, and you purchase $100 worth of LTC, SoFi would increase the LTC price to $101.25. Consequently, you would get slightly less than 1 full LTC because of this markup.
Pros and Cons of SoFi Crypto
- Easy-to-use interface for users
- Option to buy fractional shares
- Mobile trading platform with comprehensive features
- 1.25% markup fee for each cryptocurrency transaction
- Absence of a digital wallet
- Inability to transfer coins in or out
Features & Benefits
SoFi Crypto offers features and benefits for investing in cryptocurrencies:
- Trading: Buy and sell 5 different cryptocurrencies.
- Fractional Shares: Purchase fractions of cryptocurrencies with as little as $1.
- All-in-one: Access all financial products through one app.
- Real-time: Cryptocurrency purchases, whether by the dollar or by the coin, happen instantly in real-time.
- Financial Advisor: Get advice from a certified financial advisor at no cost to you.
SoFi Crypto Customers: What’s Next for Them?
SoFi cryptocurrency customers will receive an email about the migration process. Those who wish to move to Blockchain.com need to actively choose this option for their accounts to be transferred. This migration brings additional benefits, such as access to more tokens, advanced trading features, and enhanced security, including the ability to self-custody crypto.
Considerations for Closing Your SoFi Crypto Account
SoFi users looking to close their crypto accounts can do so proactively before December 19. On this date, active accounts will undergo automatic liquidation and closure. Users will receive transaction details via email and receive the proceeds in their brokerage accounts within 60 days. However, it’s crucial to consider the potential tax implications of liquidating holdings, as profits may incur capital gains tax.”
Varying Rules Across States and Cryptocurrencies
Blockchain.com doesn’t provide services in all U.S. states directly. Some tokens won’t be available for migration to Blockchain.com in specific states.
Customers in Virginia, Hawaii, Louisiana, New Jersey, Nevada, Tennessee, and Texas will use Bakkt Crypto Solutions services. They need to agree to Bakkt’s terms.
Certain tokens like Aave, Stellar, Uniswap, and Polkadot will be sold automatically during account migration on Dec. 19 for customers in those states.
Users in New York can’t migrate; their accounts will stay open until Jan. 28. From Dec. 19 to Jan. 28, they can only sell, not buy. After Jan. 28, accounts will be closed and liquidated like other users.
SoFi’s Decision to Shut Crypto Operations: Reasons Behind the Move
SoFi had been thinking of leaving the crypto business for about two years. In January 2022, they got permission from the Office of the Comptroller of the Currency (OCC) to become a bank holding company, but there was a condition. The condition was that SoFi couldn’t do any crypto activities without OCC approval, and this was mentioned in a filing from September 2022. According to the Bank Holding Company Act, they could keep offering their current digital assets for two years after becoming a bank holding company. SoFi has said before that cryptocurrency isn’t a big part of what they do. As of 2 p.m. Eastern SoFi shares were up about 2%.
SoFi is stepping away from the cryptocurrency business as the U.S. crypto industry faces more regulatory attention, with the SEC taking actions against major exchanges like Binance and Coinbase.
This move by SoFi is influenced by guidance from the Federal Reserve Board, which granted SoFi a bank charter in January 2022. The Federal Reserve discovered that certain crypto-related activities conducted by SoFi Digital Assets, LLC, weren’t allowed for a bank holding company under the Bank Holding Company Act and Regulation Y.
Even though SoFi had a limited time to continue crypto operations with possible extensions, it decided to stop crypto services due to increasing regulatory scrutiny. In August, the Federal Reserve introduced a “novel activities supervision program,” imposing strict requirements on how banks handle emerging financial technologies, including cryptocurrencies. SoFi is the first major financial institution to exit the crypto space due to the Federal Reserve’s heightened scrutiny.
The Federal Reserve’s program, focusing on overseeing relationships between banks and cryptocurrencies, influenced SoFi’s decision to end crypto services. This guidance became crucial after SoFi became a bank holding company earlier in the year. The company had concerns about the Federal Reserve’s tightening requirements for crypto-related activities, making full approval for their crypto business seem unlikely.
SoFi also expressed concerns about the SEC’s proposed adjustments to Regulation ATS and the Exchange Act Rule, which could impact the classification of crypto exchanges.
SoFi’s choice to leave the crypto business reflects a broader trend, with Metropolitan Commercial Bank also exiting its crypto business in January. Regulatory developments and changes in the banking environment regarding crypto-related businesses are cited as key reasons for these exits.
SoFi Technologies deciding to halt cryptocurrency services shows a major shift in its business strategy, reflecting broader trends in the digital asset market.
As regulations keep changing, companies in this field feel increasing pressure to adapt and adhere to compliance standards. For SoFi, this move is about strategically adjusting its services, finding a balance between opportunities in the digital asset space and the need to comply with regulations. This decision serves as a reminder to the market and its participants about the dynamic and sometimes unpredictable nature of the cryptocurrency sector.