Letter to SoFi CEO from United States Senate Committee on Banking, Housing and Urban Affairs

Gunnar Larson g at xny.io
Wed Nov 23 14:04:38 PST 2022


November 21, 2022
Mr. Anthony Noto
Chief Executive Officer
SoFi Technologies, Inc.
234 1st Street
San Francisco, CA 94105
Dear Mr. Noto:
We write to inquire about SoFi Technologies, Inc.’s (SoFi) progress to
conform its digital asset
trading activities to U.S. banking law. Over the past year, several
meltdowns in the crypto
market have wiped out trillions in value, including another huge crash last
week. We are
concerned that SoFi’s continued nonbank digital asset trading activities
pose risks to consumers
and safety and soundness risks to your institution.
In February 2022, SoFi completed its acquisition of Golden Pacific Bancorp,
a bank holding
company (BHC) and its subsidiary Golden Pacific Bank, a national bank.1
 As part of that
transaction, SoFi received approval from the Federal Reserve to become a
BHC and elected to be
treated as a financial holding company (FHC) subject to consolidated
supervision by the Federal
Reserve.2 Additionally, SoFi received a conditional approval from the
Office of the Comptroller
of the Currency (OCC) to create a full-service national bank subsidiary
insured by the Federal
Deposit Insurance Corporation (FDIC).3
Following its conversion to a BHC, SoFi continues to operate a nonbank
subsidiary called SoFi
Digital Assets, an exchange for retail investors to buy and sell digital
assets. In its letter dated
January 18, 2022, granting approval, the Federal Reserve noted that “SoFi
is currently engaged
in crypto-asset related activities that the Board has not found to be
permissible” for a BHC or an
FHC. SoFi’s most recent annual report states that these impermissible
activities are conducted
by SoFi Digital Assets.4

Under the January 18, 2022 letter, SoFi has two years to either divest SoFi
Digital Assets or
conform its activities to the law, with the potential for up to three
one-year extensions in the Federal Reserve’s discretion. During this
conformance period, SoFi has committed not to
“expand [its] impermissible activities,” except as specifically authorized
by law. Specifically,
SoFi has committed not to increase the “types of products and services
offered” and the
“established risk limits for total customer digital assets maintained in
wallets that are accessible
online . . . or held on balance sheet.” In addition, the OCC’s conditional
approval restricts SoFi’s
national bank subsidiary from conducting “any crypto-asset activities or
services” without prior
regulatory approval.
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
First, SoFi’s apparent expansion of its digital asset services raises
questions about progress
towards meeting conformance commitments by January 2024. Two months after
approval to become a BHC, 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 company publicly
billed this service as “the latest expansion of SoFi’s offerings to make it
simpler to get started
with cryptocurrency investing.”5

Second, SoFi’s facilitation of customer digital asset trading and holding
digital assets on-balance
sheet raises questions about the appropriate calculation of capital
requirements. Under current
capital rules, the capital treatment of these digital assets follows their
accounting treatment rather
than capital standards tailored to the risks of this particular asset
class. While digital assets can
pose the same risks as traditional financial assets, the recent market
crash has highlighted
concerning credit, market, liquidity, and operational risks associated with
digital assets.
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.
Third, SoFi’s standards for choosing which digital assets to offer its
customers for trading raises
investor protection concerns. According to criteria listed on SoFi’s
website, the company’s
policy is to list assets that “align with SoFi’s values, such as promoting
financial inclusion and
economic freedom.”6
 But 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.”7
 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.

Accordingly, we ask that you reply to the following questions no later than
December 8, 2022:
1. Describe SoFi’s policies and procedures for:
a. Determining which digital assets to offer and sell through SoFi Digital
b. Ensuring that digital asset purchases and sales are conducted in
compliance with
applicable laws and regulations.
c. Identifying any potential conflicts of interest and how those conflicts
should be
d. Monitoring customer complaints and their resolution.
2. How has SoFi determined the appropriate credit, market, and operational
risk capital
requirements for digital asset exposures, including customer digital assets
and digital
assets held on SoFi’s balance sheet?
3. Does SoFi Digital Assets offer any securities for purchase or sale? If
so, how do SoFi
Digital Asset’s existing registrations and licenses provide authorization
to operate a
platform for buying and selling those securities?
4. Describe SoFi’s plan to conform its digital asset trading activities to
the BHC Act and
Regulation Y by January 2024. How have the policies and offerings described
questions 1-3 changed, if at all, since January 18, 2022? How does its
service allowing
customers to invest part of their direct deposit in digital assets meet
SoFi’s conformance
commitments to the Federal Reserve and the OCC’s restrictions on engaging
in digital
asset activities within the national bank?
Thank you for your attention and prompt response to these questions.
Sherrod Brown Jack Reed
United States Senator United States Senator
Chris Van Hollen Tina Smith
United States Senator United States Senator
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