US Senate Banking Committee Chairman Sherrod Brown and three other Democratic committee members sent letters on November 21 to federal officials and Anthony Noto, president of SoFi Technology. They raised concerns about the online bank’s efforts to conform to Federal Reserve Board requirements and the non-bank digital asset trading activities conducted through SoFi Digital Assets.
In the letter to Noto, Sherrod, along with Sens. Jack Reed, Chris Van Hollen, and Tina Smith, notes that the Federal Reserve had said that SoFi “is currently engaged in crypto-asset-related activities that the Board has not deemed permissible.” for a bank holding company (BHC) or financial holding company (FHC). SoFi was granted financial holding company status by the Federal Reserve following its purchase of bank holding company Gold Pacific Bancorp earlier this year.
Although the Fed gave SoFi two years to legalize or divest SoFi Digital Assets, the senators wrote:
“We are concerned that SoFi’s continued impermissible digital asset activities demonstrate that it is not taking its regulatory commitments seriously or adhering to its obligations.”
SoFi was barred from expanding its disallowed activities or conducting crypto transactions at its national banking subsidiary, but “announced a new service that allows customers of its national bank to invest part of each direct deposit in digital assets without fees”. In addition, “SoFi’s facilitation of customer digital asset trading and holding of digital assets on the balance sheet raises questions about the proper calculation of capital requirements.” They warn:
“Taxpayers could be in a bind if crypto-related exposures in SoFi Digital Assets ultimately require their parent BHC or affiliated national bank to seek emergency liquidity or other financial assistance from the Federal Reserve or FDIC [Corporación Federal de Seguros de Depósitos]”.
Lastly, the senators question the choice of digital assets offered by SoFi. SoFi identified one of the coins it offers as “a pump-and-dump cryptocurrency” in its investor protection materials, but has not stopped offering it. The authors demand a response to these questions that they raised before December 8th.
The senators also sent a letter to Fed Vice Chairman Michael Barr, Acting Federal Deposit Insurance Corporation President Martin Gruenberg, and Acting Comptroller of the Currency Michael Hsu repeating their concerns. “It is imperative that the Fed, FDIC and OCC [Oficina del Contralor de la Moneda] ensure that SoFi complies with all banking and consumer financial protection regulations”they wrote.
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