WASHINGTON–Four Democratic members of the Senate Banking Committee are calling on regulators to review SoFi’s cryptocurrency trading activity, suggesting the company’s "digital asset activities pose significant risks to both individual investors and safety and soundness,” especially since it also operates as a bank holding company.
SoFi, which began its life as a peer-to-peer lender, has grown quickly and closed 2021 with more than $9 billion in assets.
In two separate letters, one to federal officials and another to SoFi CEO Anthony Noto, the lawmakers said they are worried about the lack of regulation in cryptocurrency markets.
"Over the past year, several meltdowns in the crypto market have wiped out trillions in value, including another huge crash last week," the letter to Noto reads.
SoFi is unique among institutions singled out for regulatory scrutiny because it operates as both a bank holding company and as a crypto exchange, through a subsidiary, noted CNBC.
“SoFi pitches itself as a digital financial services company with 3.9 million members as of Q1 2022. SoFi began as a student loan company in 2011,” the CNBC report states. “Since then, the San Francisco-based, Nasdaq-traded company made its first foray into crypto through a partnership with Coinbase in 2019. But lawmakers have honed in on SoFi's February 2022 acquisition of Golden Pacific Bancorp.”
Fed Oversight
As CNBC reported, that acquisition converted SoFi into a bank holding company and, according to lawmakers, subjected it to "consolidated supervision by the Federal Reserve."
It's this new regulatory oversight that has prompted lawmakers' objections to SoFi's expanding cryptocurrency offerings, CNBC said, adding that holding companies have to conform to strict regulations on the kinds of financial products they can offer.
Heightened financial and risk controls mean that SoFi's crypto activities "pose significant risks to both individual investors and safety and soundness," the lawmakers said in the letter.
The letters were sent by Senate Banking Chair Sherrod Brown (D-OH), and fellow committee members Jack Reed (D-RI), Chris Van Hollen (D-MD) and Tina Smith (D-MN).
Company’s Own Words Cited
CNBC also pointed to SoFi's own financial guidance as evidence, in which it warns that a cryptocurrency offered on SoFi's crypto platform, Dogecoin, has "no special use case or features." SoFi's literature calls it a pump-and-dump scheme.
The letter says that to offer products that the company knows are "pump-and-dumps" flies in the face of SoFi's new obligation to "fundamental principles of investor protection and safety and soundness," lawmakers wrote, CNBC said.
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