WASHINGTON — Democrats on the Senate Banking Committee in letters to SoFi Technologies and banking regulators questioned whether the bank's crypto activities are appropriate for the bank, especially given the recent collapse of FTX.
The San Francisco-based company, according to the senators led by Sen. Sherrod Brown, D-Ohio, chair of the Senate Banking Committee, has two years as of January 2022, when its
Since then the company has "apparently" expanded these operations, according to the senators.
"Two months after receiving regulatory approval, SoFi announced a new service allowing customers of its national bank to invest part of every direct deposit into digital assets with no fees," the lawmakers said. "The company publicly billed this service as 'the latest expansion of SoFi's offerings to make it simpler to get started with cryptocurrency investing.' "
SoFi says it has no exposure to FTX, FTT token, Alameda Research, or Genesis, and that it doesn't engage in any other crypto financing activity other than allowing members to buy and sell cryptocurrency on its platform.
"SoFi takes our regulatory and compliance commitments seriously, including our non-bank operations within the digital assets space.," a spokesman said. "We believe we have been fully compliant with the mandates of our bank license and all applicable laws. Additionally, we maintain consistent, constructive dialogue with each of our regulators. Cryptocurrency remains a non-material component of our business. We look forward to sharing the requested information with the Senators in a timely fashion."
Brown, along with Democratic Sens. Jack Reed of Rhode Island, Chris Van Hollen of Maryland and Tina Smith of Minnesota, sent a letter to the Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp., and another to SoFi, pressing on SoFi's crypto trading activities.
SoFi's trading operation poses "significant risks to both individual investors and safety and soundness," they said. Amid turmoil in the crypto market, banking regulators have been quick to point out that the banking system has
"As we saw with the crypto meltdown this summer, where crypto-assets lost over $1 trillion in value in a matter of weeks, contagion in the banking system was limited because of regulatory guardrails," the lawmakers said. "In the event of crypto-related exposures at SoFi Digital Assets ultimately require its parent company, bank holding company, or affiliated national bank to seek emergency liquidity or other financial assistance from the Federal Reserve or FDIC, taxpayers may be on the hook."
In their separate letter to SoFi, the Senate Banking Democratic lawmakers also asked about SoFi's plans to divest their trading arm.
"We are concerned that SoFi's continued impermissible digital asset activities demonstrate a failure to take seriously its regulatory commitments and to adhere to its obligations," the letter says.
The lawmakers also raised questions about how SoFi is
"Appropriate capital treatment is important because taxpayers could be on the hook if crypto-related exposures at SoFi Digital Assets ultimately require its parent BHC or affiliated national bank to seek emergency liquidity or other financial assistance from the Federal Reserve or FDIC," the lawmakers said.
Some of the assets that SoFi offers might also be problematic for safety and soundness, they said.
"SoFi's own investor protection materials posted on its website warn customers that at least one token listed on SoFi Digital Assets is 'a crypto pump-and-dump' hazard with 'no special use case or features' and that it "might be among the most high-risk endeavors an investor can take,'" the senators said. "At the time SoFi issued this warning, the company had been offering this asset for several months and still offers it today. Facilitating retail sales of an investment product that SoFi has identified as a fraud and susceptible to market manipulation is incompatible with fundamental principles of investor protection and safety and soundness."
