SoFi Is Only The Beginning Of Bank-Based Crypto Products

Crypto adoption by TradFi continues to accelerate

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The news that SoFi will be reinstating crypto trading options for retail customers is sending a clear message to both the banking sector as well as the cryptoasset slice of the investing marketplace; TradFi and crypto continue to merge. The rollout of these trading pairs and services is scheduled to be available for all 12.6 million SoFi customers prior to the end of 2025. Prior to diving into the implications of retail based crypto options being offered it is prudent to briefly recap the journey that SoFi has been on since 2022 to successfully integrate and merge crypto-native operations and TradFi banking and banking adjacent services.

SoFi actually embraced the crypto sector prior to even obtaining a national bank charter, with the 2022 approval from the OCC coming with strict requirements linked to the crypto trading activities offered by the bank at that time. Following the collapse of FTX and numerous policy and legal headwinds that negatively influenced regulatory and legal actions toward the sector, SoFi shuttered the retail trading platform in 2023. Even as the bank had continued to grow and develop new customers and lines of service, due to the ambiguity related to crypto regulation, even a bank that had obtained a federal banking charter was finding it impossible to engage with the crypto sector.

Now that SoFi is back in the crypt trading arena, let’s take a look at what else might be coming sooner than some investors expect.

SoFi Signals Further TradFi And Crypto Integration

One of the most important ramifications of the relaunch of SoFi’s crypto trading options for retail investors is that it is among the first banks to enable and launch such a retail facing crypto product. While other institutions such as J.P. Morgan Chase have been steadily increasing capacity for on-chain transactions via in-house blockchains, as well as deploying a demand deposit token for settlement uses, and other firms such as Fidelity have integrated crypto investing into existing baskets of products, SoFi is taking the outreach to crypto one step further. In addition, the bank has publicly announced plans to eventually launch a SoFi issued stablecoin, allow customers to take loans against crypto holdings, and leverage on-chain transactions for remittances.

In other words the relaunch of crypto trading pairs by SoFi looks like simply the first in what is forecasted to be an entire suit of crypto-related products and services, aimed directly at the retail customer.

Margin And Compliance Pressure Will Increase

One aspect that will continue to accelerate as TradFi integration of crypto products and services continue to expand is that the same margin compression that has occurred for brokers and other financial institutions will come to crypto. For contextual purposes the fees charged by Coinbase remain higher than those charge by both other crypto brokers as well as TradFi brokers; as more competition enters the sector it is doubtful that such a spread will remain. While the reduction in fees has led to these firms generating profitability from other areas the fact is that TradFi entering the crypto trading landscape will lead to lower revenue and profitability generated from facilitating trading activity.

Additionally as the on-ramping of retail investors and traders via these TradFi firms increases the importance of compliance, cybersecurity measures that are implemented proactively, and the ability to compensate investors for the breaches and hacks that will inevitably occur will also more to the forefront. Improving the user experience of crypto investing is just the first step; mass utilization will require the full embedding of these services into crypto service offerings.

Retail Education and Protection Needs Prioritization

As banks continue to enter in the crypto sector via a wide range of products of services at the same time that regulatory and policy pivots to a more pro-crypto outlook it not a question of “if” but “when” mass adoption of crypto among retail investors will occur. For all the benefits and opportunities that such a transition will deliver there is still significant asymmetry in terms of investor education, risk assessment, and cybersecurity. Investors, and especially the very retail investors that many of these newer TradFi products and services are targeting, are the same group most in need of continuous education and enhanced protection.

Regardless of whether this education and investor protection takes the form of legislative changes to enshrine such protections in law, or whether it is led by the institutions independent of policy efforts, the fact remains that both areas require significant work to generate the buy-in required for sustained growth.

Crypto is at a crossroads, and the relaunch of crypto trading at SoFi is just the beginning of mass adoption by the TradFi space.