San Francisco-based crypto firm SoFi has decided to shut down its digital asset operations, therefore, users have until the next three weeks to migrate their accounts to Blockchain.com.
According to a Bloomberg report, users who fail to complete the action before the stipulated time would have their assets automatically liquidated. At the same time, SoFi customers will not be allowed to open new crypto accounts.
Regulatory Scrutiny Scares Crypto Firms
The migration process has a regional restriction clause to it: New Yorkers are not eligible for the migration while users in some other states will be required to sell off certain unsupported tokens like Avalanche (AVAX) and SushiSwap.
The decision to shutter its crypto services was borne out of the increased regulatory scrutiny in the crypto industry. Markedly, SoFi began 12 years ago as a student-lending company but expanded with time to include crypto service after which it received a bank charter that is conditional on its crypto performance. SoFi was required to obtain the necessary regulatory approvals or exit the crypto market within 2 years.
U.S Authorities Enforce Crypto Supervision Program
Four months ago, the Federal Reserve announced a ‘Novel Activities Supervision Program’ which was designed to monitors lenders involvement in the crypto industry. This was after the Fed, Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency highlighted the volatility of digital assets and the risks associated with them.
In the same vein, Custodia Bank’s application to become a member of the Reserve system by the United States Federal Reserve Board was denied on the basis that its “proposed focus on crypto-assets presented significant safety and soundness risks.”
SoFi Foresees the Winding Up
Per the company’s Q3 earnings report, SoFi held almost $140 million in cryptocurrencies, with a large percentage of $75 million in Bitcoin (BTC) and $47 million on Ether. Before now, the firm perceived the possibility of winding down its operation.
“While we are engaging with the Federal Reserve to determine whether there is a path to conform our crypto-related activities to the requirements of the Bank Holding Company Act, there can be no assurance that such attempts will be successful……we may ultimately be forced to wind-down such activities in a short period of time,” SoFi stated in its 10-K annual report.