The New York State Department of Financial Services (NYDFS) has granted a BitLicense to SoFi, allowing New York-based users of the digital bank to trade cryptocurrencies in its app.
The BitLicense, considered the toughest state regulation in the country for virtual currency-related companies, is notoriously dreaded and controversial among startups but has become a symbol of legitimacy for the still young and erratic industry. With 20 million consumers and the largest financial hub in the world, being able to operate in New York is an integral part of growth for any startup as well as cryptocurrency adoption.
"NYDFS is committed to fostering innovation in New York's vibrant virtual currency sector and ensuring its competitiveness as a market for new entrants," NYDFS Superintendent Linda Lacewell said in an emailed statement. "The Department's approval of SoFi's virtual currency and money transmitter licenses provides consumers with more choices in a continuously evolving global financial services marketplace."
SoFi, which made its name as a student lending company, has about 800,000 users today, although it's hoping to become a household name over the next decade, if not sooner. By comparison, the stock-trading app Robinhood has six million users and Square's money transfer service Cash App has 15 million users.
SoFi added bitcoin, litecoin, and ether trading in September within the SoFi Invest platform, which launched earlier this year. Members can also track the prices of up to 40 other digital assets in real-time.
SoFi is the third digital finance company to begin offering crypto trading, following Robinhood and Square's Cash App. The move signals increased demand by audiences of fintech apps that aren't necessarily crypto native apps (like Coinbase, Circle, or Blockchain) for new types of assets besides stocks and public companies. These fintech companies, regardless of their initial value proposition or their particular type of customer, are all looking to meet that demand.
The BitLicense application is an expensive and cumbersome process that can cost hundreds of thousands of dollars and requires an exacting review of capital requirements and policies regarding money laundering, fraud, capitalization, consumer protection, and cybersecurity. It is required of companies wanting to operate with residents of the state, even if the company itself is based out of state.
"Putting our members' interests first is our top priority at SoFi," Anthony Noto, SoFi CEO said in a statement. "That includes both offering individuals the products they want, like cryptocurrency within SoFi Invest, as well as protecting them, through a solid regulatory framework like that created by the NYDFS."