Online bank SoFi is fighting on two fronts after the White House paused student loans and senators began to probe its crypto operations in the wake of the collapse of Bahamas-based exchange FTX.
This week, US senators wrote open letters to several bank regulators inquiring about SoFi’s crypto asset trading. Senators Sherrod Brown, Jack Reed, Chris Van Holland, and Tina Smith were all concerned about the online bank being able to adequately protect its customers in the wake of FTX’s implosion.
But that’s not the only problem facing SoFi. The bank is also facing a drastic drop in revenue after President Biden once again froze student loan payments, meaning that SoFi misses out on the lucrative interest it would normally receive.
SoFi takes our regulatory and compliance commitments seriously, including our non-bank operations within the digital assets space. We believe we have been fully compliant with the mandates of our bank license and all applicable laws.
— SoFi (@SoFi) November 21, 2022
SoFi said, “We have no direct exposure to FTX, FTT token, Alameda Research, or Genesis.”
The news means hundreds of thousands of new student loans are off the table for SoFi in the coming year. Indeed, in its 2022 Q3 earnings report, the bank noted a 53% decrease in student loan volume compared to pre-pandemic averages.
Student loans were first frozen in 2020 as part of an initiative to help struggling students cope with the costs of Covid-19. The program offers $20,000 in debt relief per student and has now been extended eight times.
Read more: FTX bankruptcy: A complete failure, worse than Enron
SoFi’s crypto arm struggles
The senator’s letter to SoFi gives the company two years to divest its crypto arm, with the potential of a 2027 deadline extension. But senators claim that SoFi is actively expanding its crypto operations instead.
The letter states: “Two months after receiving 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.”
Senators also pointed out how SoFi’s criteria for listing crypto assets didn’t align with its company values. They wrote: “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.” CoinDesk reported this token was dogecoin.
Despite all this, the company has predicted its adjusted net revenue for the year to be between $1.517 billion and $1.522 billion.