U.S. Senators Call For Review of SoFi’s Cryptocurrency Listings by Bank Regulators

• by Artem
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• November 22, 2022
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• Cryptocurrency News

U.S. senators Sherrod Brown (D-Ohio), Chris Van Holland (D-Md.), Jack Reed (D-R.I.), & Tina Smith (D-Minn.) sent open letters to SoFi, a digital finance startup, and several bank regulators requesting a “review” of SoFi’s cryptocurrency offers. Concerns were raised in the letter to SoFi regarding the firm’s plans to grow its cryptocurrency business, how it manages its customers’ crypto assets, and its listing of dogecoin (DOGE), which the company had previously used as an instance of a “pump and dump” coin in a blog post on its website.

The Lawmakers want an explanation from SoFi about how it advertises cryptocurrencies for sale, responds to customer concerns, and chooses the right credit, market, and operational risk capital necessary for the exposure of digital assets. The note to the firm further requested the state to clarify whether SoFi is authorized to provide securities and, if so, whether it offers any cryptocurrencies that qualify.

SoFi “committed not to ‘expand [its] impermissible activities,'” according to a separate letter sent to the Federal Reserve’s Vice Chair for Supervision Michael Barr, Acting Comptroller of the Currency Michael Hsu, & Acting Federal Deposit Insurance Corporation Chair Martin Gruenberg, but, it looks that the company has increased the retail activities for digital assets.

“SoFi’s digital asset activities pose significant risks to both individual investors and safety and soundness. 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,” said the letter. Taxpayers may be held responsible if SoFi Digital Assets’ exposure to cryptocurrency causes its parent business, bank holding company, or linked national bank to request emergency liquidity or financial aid from the Federal Reserve or FDIC.

A SoFi spokesperson stated that while the firm permits its users to purchase and sell cryptocurrencies, it does not offer any other kind of funding for cryptocurrencies. According to the spokesperson, SoFi takes its obligations in terms of regulation and compliance very seriously, including its non-bank activities in the world of digital assets. In their opinion, the requirements of bank licenses and other relevant legislation have been properly met. 

In addition, they regularly and constructively communicate with all regulators. Cryptocurrency use is an immaterial aspect of the company’s operations. They look forward to promptly providing the senators with the requested information. FTX, the FTT coin, Alameda Research, and Genesis Global Trading were not mentioned by the representative for SoFi.