Online Bank SoFi Launches Stablecoin Infrastructure To Power Settlements for Banks and Fintechs

SoFi has launched its native stablecoin, SoFiUSD, becoming the first U.S. national bank to issue a stablecoin on a public blockchain. The fully reserved U.S. dollar stablecoin will enable SoFi Bank to offer near-instant, low-cost fund settlements for its partners, including banks, fintechs, card networks, and retailers.

SoFi Launches Native Stablecoin, SoFiUSD

On December 18, SoFi Bank announced the launch of SoFiUSD, a fully reserved U.S. dollar stablecoin issued, becoming the first nationally chartered bank to launch a stablecoin on a public blockchain. The launch comes just a month after SoFi launched crypto trading in more than 30 digital assets for retail customers.

According to the statement, the stablecoin launch focuses on making SoFi an infrastructure that allows banks, fintechs, and enterprise platforms to move money faster, in a more efficient way. The SoFiUSD stablecoin infrastructure was first used on Ethereum, but it can be expanded to support other networks as time goes by.

The launch will give SoFi Bank customers access to the stablecoin, as well as grant banks and fintechs access to SoFi’s stablecoin infrastructure. The SoFi stablecoin infrastructure will let partners create white-labeled versions. The stablecoins created by banks and Fintechs will be interchangeable with SoFiUSD. 

However, SoFi has announced that while it’s live for institutional settlement, partners will get broader access to SoFiUSD stablecoin infrastructure in the coming months. SoFi had hinted earlier that its stablecoin would be integrated into other banking services, including lending.

SoFIUSD To Solve Transaction Problems in Traditional Payments

According to Anthony Noto, the CEO of SoFi, companies struggle with slow settlement times and fragmented providers. Noto believes that blockchain will change every area of money, and that his company will use the infrastructure they have built in the last decade to solve “real-world challenges in financial services.”

The SoFiUSD stablecoin will provide a solution to those problems. SoFi has announced that partners will be capable of integrating SoFiUSD into settlement and payment flows via the firm’s bank-grade infrastructure. 

This will allow near-instant transactions around the clock at a cost of a fraction of a cent. SoFi will use SoFiUSD in its consumer crypto trading business. In future, SoFi Bank also plans to expand the use of the stablecoin, including it for international money transfers and point-of-sale services.

Because SoFi Bank is regulated by the Office of the Comptroller of the Currency, the online bank holds SoFiUSD reserves at the Federal Reserve for immediate redemption. The Initial mint for SoFiUSD started at $10,000. The online bank is already in advanced talks with multiple institutions about using the stablecoin.

According to the statement issued, SoFi will share yield with SoFiUSD holders and partners. The yield from the stablecoin will be generated from cash reserves parked in its Federal Reserve account.

What This Launch Means for the Crypto Market

The entry of a federally chartered bank into the public stablecoin could be a watershed moment for the crypto market. First, it significantly reduces the risk associated with the asset class for institutional investors. Hedge funds and pension desks can now settle transactions using a stablecoin issued by a regulated bank rather than an offshore entity like Tether.

SoFiUSD and its stablecoin infrastructure could also pose a direct challenge to the duopoly of Tether (USDT) and Circle (USDC). While SoFiUSD may not capture the offshore derivative market immediately, it is poised to dominate the onshore, KYC-compliant DeFi sector.