Could Crypto Take SoFi Stock to the Next Level?

Yahoo

2 days ago

SoFi announced it will bring cryptocurrency trading back to its app.
The bank will also use blockchain to facilitate cross-border money transfers.
These features could help bring new customers into the growing ecosystem.
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After a nearly two-year hiatus from the cryptocurrency industry, banking and finance app SoFi (NASDAQ: SOFI) recently announced that it will be getting back into the crypto market, and in an even bigger way than before.
SoFi made two specific announcements. First, it reported the return of crypto trading to its app -- a service it had offered until late 2023. Second, the bank announced that it would leverage the capabilities of cryptocurrency and blockchain technology to facilitate rapid international money transfers. And perhaps most importantly, SoFi called this the "first of many planned crypto and blockchain innovations across [their] products and services." Both of these newly announced capabilities are expected to launch later in 2025.
When it comes to cross-border money transfers, the goal is to create a more seamless and low-cost experience than currently exists in the market. And with the return of crypto trading, SoFi's goal is to gradually expand the platform, including offering stablecoins, allowing members to borrow against cryptocurrencies, and introducing staking features.
The goal is to equip the SoFi app with more financial service capabilities than any other app. But will crypto and its related capabilities become a major revenue driver that will move the stock?
To clarify, SoFi used to offer cryptocurrency trading in its app but closed it down a few years ago, mainly due to potential regulatory issues involving chartered banks providing cryptocurrency services to customers. This is also why you generally haven't seen any major banks roll out cryptocurrency trading platforms of their own.
Specifically, SoFi became a bank in January 2022, and as part of the approval process, it was forced to refrain from engaging in any cryptocurrency-related activities without specific approval from the Office of the Comptroller of the Currency (OCC).
However, SoFi says that clarification provided by the OCC recently makes it practical for nationally chartered banks to "provide crypto custody and execution services on behalf of customers, hold dollar deposits serving as reserves backing stablecoins in certain circumstances, engage in certain stablecoin activities to facilitate payment transactions, and more."
On the one hand, it's important to point out that back in 2023, when it shut down crypto trading, SoFi specifically said that it wasn't a material part of its business. On the other hand, it's fair to say that interest in cryptocurrency trading has once again surged in popularity since SoFi shut down its original cryptocurrency platform in late 2023.
It's unclear how SoFi's crypto trading pricing will be structured, but it will likely make money through either a percentage-based transaction fee or a spread between the buy and sell prices of each digital asset.
To be clear, I don't see crypto trading becoming one of the company's major revenue streams anytime soon. But adding this feature to its ecosystem could make SoFi's platform more attractive to potential customers interested in crypto, who may also become banking customers, loan customers, and so forth.
The bigger news is likely the ability to send money internationally in a fully automated and low-cost manner directly through the SoFi app. While this is technically a crypto-enabled feature, it will likely appeal to a broader group than just cryptocurrency fans, as the transactions will be initiated in U.S. dollars. And this would be a unique feature among finance apps. With over $90 billion in international transfers sent annually from the U.S., a better way to do it could be a major draw.
SoFi's customer base is growing quickly. It added more than 800,000 members during the first quarter alone, an all-time high for the company. If adding cryptocurrency trading and related services can help keep this growth going -- or even accelerate it -- it could be a big win for investors.
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Matt Frankel has positions in SoFi Technologies. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Could Crypto Take SoFi Stock to the Next Level? was originally published by The Motley Fool