SoFi Bank is about to start issuing the SoFiUSD digital currency, which it describes as “a fully reserved U.S. dollar stablecoin”. Unlike other stablecoin issuers such as Circle and Ripple, which both recently received provisional national trust charters, SoFi is a licensed national bank, making it the first US licensed national bank to issue a stablecoin. The bank intends the stablecoin to be used by its clients and other consumers, and also wants other banks to use its infrastructure to create white-labelled stablecoins, offering to share most of the revenues with them.
As an insured depository institution, SoFi Bank can keep the stablecoin reserves earning interest in its master account at the Federal Reserve. This should enable it to meet high redemption demands with less risk compared to using Treasuries as reserves. However, one of the Trump administration’s goals with stablecoins is to increase demand for US Treasuries, and keeping reserves at the Fed doesn’t fit the bill.
This raises an important question: to segregate the money from other operations, it may be possible to put the reserves in a sub account at the Fed. But what legal structure can ensure that the stablecoin reserves are bankruptcy remote? We’ve contacted SoFi to clarify, but didn’t receive a response in time for publication. Once the GENIUS Act comes into force, this will not be an issue, because it requires banks to issue stablecoins via separate subsidiaries.
While the regulatory structure evolves, the bank has found a creative workaround by mixing a deposit token and a stablecoin. If a SoFi Bank client holds the digital asset on the SoFi platform, it will not be treated as a stablecoin. Instead, it will be a deposit token, enabling the user to earn interest and be covered by FDIC insurance. For users that hold the SoFiUSD token elsewhere, it will be treated as a stablecoin, with no interest or insurance.
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