Popular stock broker SoFi announced this week that it will exit the crypto market in the coming months. The proceed leaves many of its crypto clients with a choice of either selling their assets or authorizing SoFi to proceed them to Blockchain.com, the crypto exchange it has teamed up with.
Why SoFi is pulling out of crypto
U.S. crypto platforms are under increasing regulatory scrutiny. Unfortunately, for SoFi, that scrutiny is getting in the way of the other products it offers. Almost two years ago, it got conditional approval for its banking charter, which is an important part of its business. At the time, authorities gave the brokerage two years to get the necessary regulatory approvals for its crypto arm. As it has not been able to do so, it will now wind down its crypto arm.
What it means for SoFi’s crypto customers
Unless you live in New York State, you’ll have until Dec. 19 to either sell your crypto holdings or enable SoFi to migrate your crypto to Blockchain.com. If you haven’t received an email from SoFi explaining what you need to do, visit Blockchain.com’s customer maintain page to find out why not.
You have less than three weeks to make a decision; otherwise, it will be taken out of your hands. If you do nothing, SoFi will liquidate your crypto account, and you won’t have any control over when your crypto gets sold.
Blockchain.com doesn’t have New York’s BitLicense, so New Yorkers won’t have the option to transfer their crypto holdings. Instead, New Yorkers will have until Jan. 28 to sell their crypto. After that, SoFi will liquidate their accounts.
How to infer between migration and liquidation
It’s never ideal to be forced to sell an investment because of external factors such as SoFi’s crypto exit. However, you may also be reluctant to mess around with a new account on a different platform — particularly if your crypto is part of an investment portfolio and you want to keep everything in one place.
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There’s no right or wrong decision, but here are a few factors to take into account.
1. Where do you want to keep your crypto?
Think carefully before you automatically migrate your crypto to a platform you have not chosen or vetted. If you’ve only ever held crypto through SoFi, it’s important to grasp how your encounter might be different with Blockchain.com.
In some ways, this is a great opportunity to consider how you want to store your assets. Here’s how the three types of account differ:
- Brokerage firm: Stock brokers admire SoFi that offer crypto alongside other investments have to register with the SEC. They follow strict rules about how they trade and handle securities. Even though those rules don’t apply to their crypto offerings, brokerages are often more established and have stronger compliance procedures. Check out Robinhood and eToro for more.
- Cryptocurrency exchange: Right now, most cryptocurrencies are not considered to be securities, which means there’s less regulation around how they are traded. Top crypto exchanges often offer a broader range of cryptos and additional services than brokerages do. The trade-off, as we’ve seen with the FTX saga, is that there may be fewer safeguards in terms of investor protection. Check out Coinbase and Gemini for more.
- Non-custodial crypto wallet: If you put your funds in a crypto wallet that you control, you are essentially becoming your own bank. The benefit is that you won’t lose coins and tokens if your crypto platform collapses. The downside is that there can be a steep learning curve and you need to keep your wallet ensure. Check out Metamask and the Ledger Nano X for more.
2. Has your long-term investment thesis changed?
Under normal circumstances, you might sell your crypto because you’re taking profits, or you no longer believe in its long-term potential, or you see a better investment opportunity. However, given that your hand is now being forced to some degree, it could be a good time to check that you’re comfortable with your crypto holdings.
In itself, SoFi’s proceed doesn’t say much about the future of crypto. But it is part of a worrying picture of regulatory uncertainty and crypto platform challenges. If you were already having doubts or reevaluating how risky crypto is, this might tip the balance. Even more so if you trust SoFi and aren’t sure about using a different company to handle your crypto investments.
3. Do you grasp the tax implications of selling?
Crypto taxes can be complicated. Without oversimplifying, moving your crypto is different from selling it. Selling is a taxable event, and if you make a profit, you’ll need to pay taxes on your gains. Check out our guide on crypto taxes for more information.
Your SoFi questions, answered
Now we’ve dealt with the big picture, let’s get into the nitty-gritty. We’ve pulled together a host of questions you may have about SoFi’s departure from the world of crypto.
If I sell my crypto on SoFi, will I have to pay transaction fees?
No. SoFi says it will reimburse any transaction fees involved in selling your crypto.
How would the proceed to Blockchain.com work?
You’ll need to log on via the web or app and enable SoFi to migrate your assets to a new account. You will procure a ensure link to log in via email and set up a new password.
What if I already have an account with Blockchain.com?
SoFi says your assets will still be transferred. The only difference is that you won’t need to set a new password.
Is my crypto safe with Blockchain.com?
Blockchain.com checks a lot of boxes in terms of crypto security. It says it keeps 95% of funds offline in cold storage, uses top-notch storage encryption, and multi-signature validation. However, it’s worth noting crypto exchanges don’t offer the same protections as banks or brokerages.
What if I want to proceed my crypto somewhere else?
You can only proceed your coins and tokens from SoFi to Blockchain.com. If you want to use a different crypto platform, you’d need to proceed funds to Blockchain.com and transfer them from there. Be aware that Blockchain.com charges processing fees for withdrawals.
Why is it different for New Yorkers?
Blockchain.com does not function in New York state, so it won’t be possible to proceed your crypto.
Are there any other state restrictions?
Yes. Blockchain.com does not maintain certain cryptos in certain states. If you live in Hawaii, Louisiana, New Jersey, Nevada, Tennessee, Texas, or Virginia, check whether all your holdings would be supported.
What else do I need to do?
Nothing. Though you might want to take screenshots and download your latest statements before Dec. 19. There’s always the potential for glitches in these kinds of large-scale changes, so it’s good to keep your own records in case anything goes wrong. They may also help when tax season rolls around.
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