Senators warn of SoFi consumer risks amid crypto crash

Quick Take

  • SoFi is under scrutiny by Senate Democrats, months after it received approval to be considered a bank holding company.
  • Crypto trading by SoFi Digital Assets could pose consumer risks, the lawmakers say, and could cost taxpayers if the firm’s parent company seeks assistance from the Federal Reserve.

Democrats on the Senate Banking Committee are worried that trading activities by SoFi Digital Assets could pose consumer risks, and warned that taxpayers “may be on the hook” to bail out the firm’s parent company if things go wrong. 

If SoFi’s digital assets branch is hit by contagion in the crypto markets, lawmakers warned that taxpayers may foot the bill if the firm’s parent company or an affiliated national bank is impacted. SoFi received approval to be considered a bank holding company earlier this year, which would allow it to seek assistance from the Federal Reserve during a liquidity crisis. 

“Taxpayers may be on the hook,” the lawmakers said. 

Sen. Sherrod Brown, the chair of the Senate Banking Committee, sent a pair of letters to SoFi CEO Anthony Noto and leaders of the Federal Reserve System, the Federal Deposit Insurance Corporation and the Comptroller of the Currency.

“SoFi’s digital asset trading activities pose risks to consumers and safety and soundness risks,” said one letter, which was also signed by Sens. Jack Reed, D-R.I., Tina Smith, D-Minn., and Chris Van Hollen, D-Conn.

The renewed focus on SoFi comes after crypto exchange FTX filed for bankruptcy protection, sending a shockwave through the digital asset industry. 

Federal Reserve approval

SoFi, a personal finance company that operates a digital assets arm, is under pressure from lawmakers to divest its crypto interests or adjust how it does business. The firm received approval from the Federal Reserve to become a bank holding company and be treated as a financial holding company when it acquired Golden Pacific Bancorp and its subsidiary, Golden Pacific Bank, in February. 

As part of the deal, SoFi agreed to divest SoFi Digital Assets or conform its activities to the law in two years. However, Democratic lawmakers say SoFi’s recent business moves don’t indicate that the firm will uphold its agreement.

SoFi announced a “new service allowing customers of its national bank to invest part of every direct deposit into digital assets with no fees” two months after the company received approval to be considered a bank holding company, for example. SoFi Digital assets is a nonbank subsidiary

“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 said. 

SoFi: Crypto is a 'non-material component' of business

Kristin Majcher contributed reporting.
Update: This story was updated with comment from SoFi. 

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