Online banking and financial services company SoFi Technologies (SOFI) has announced that it will be exiting the cryptocurrency space in the coming weeks. The decision, which follows an increasingly regulated industry, was announced to cryptocurrency customers on Wednesday.
With net revenue of more than $537 million, according to its third-quarter financial report, SoFi was by far one of the largest companies operating digital assets such as cryptocurrencies. SoFi held more than $139 million in cryptocurrency assets as of September 30 of this year, according to public documents.
If the customer chooses not to liquidate, their cryptocurrency holdings and account will be transferred to Blockchain.com. While this does not necessarily mean mass liquidations will be the result, the announcement does represent a major blow to the cryptocurrency industry, which has struggled to legitimize itself due to regulatory crackdowns and a lack of regulatory clarity.
Customers Switch to Blockchain.com: What You Need to Know
SoFi has signed an agreement to transition its cryptocurrency customers to leading cryptocurrency company Blockchain.com. The SoFo team chose the platform because of Blockchain.com’s “long history of work in the cryptocurrency industry,” the “intuitive user experience” it offers, and the “rich educational resources.”
Existing customers can choose to convert from the SoFi web or mobile app and the rest of the process will happen automatically. If customers do not choose or accept migration by December 19th, all cryptocurrency assets will be automatically liquidated by SoFi.
SoFi’s decision to migrate the accounts of all selected customers means that those users will be able to buy, sell, exchange and hold assets on the Blockchain.com platform. I don’t think there will be any loss in this case.
However, due to existing restrictions on Blockchain.com, some users may lose the ability to use certain coins. Likewise, migrating customers will have immediate access to additional coins, Visa cards on Blockchain.com, and many other features.
Mounting regulated pressure
SoFi’s departure from the cryptocurrency space comes at a time when U.S. regulators are increasing their oversight of cryptocurrencies.
Most recently, the crackdown resulted in Binance founder Changpeng Zhao paying $175 million in bonds to avoid jail, and Binance itself facing up to $4.3 billion in fines. Other exchanges, such as Kraken, have also come under fire from regulators, leading founder Jesse Powell to warn of a looming threat to the industry.
SoFi will receive its national banking charter in 2022, meaning the financial giant will need to obtain the necessary licenses to operate its cryptocurrency business. Finding itself unable to meet the requirements, SoFi decided to gradually phase out cryptocurrency-related services instead of opting for a one-year extension.
An SEC report filed by SoFi earlier this year said it would likely require “additional regulatory clearances,” which could result in “additional costs to the business” and ultimately “impair” the company’s “ability to generate revenue.” Those risks would have increased significantly “if regulators adopted a significant number of new rules in a short period of time,” according to the filing.
Cryptocurrency’s Endless Road to Mainstream Adoption
SoFi’s exit is another obstacle to mainstream adoption of cryptocurrencies. The Pew Research Center found earlier this year that 88% of Americans who have heard of cryptocurrencies are unsure about their safety and trustworthiness. The fall of various cryptocurrency giants such as FTX, Chelsea Network, and Sam Bankman-Fried has further weakened trust in cryptocurrencies.
However, the regulatory crackdown has not prevented the recovery of the cryptocurrency market over the past year. Its market capitalization is now close to $1.5 trillion, an increase of nearly 100% since the beginning of the year, according to CoinGecko data.