Payment stablecoins cannot pay holders interest under the GENIUS Act, while tokenized bank deposits can. SoFi offers both and lets holders convert between them one for one.
SoFi will pay 4.40% a year on a digital dollar that lives in a crypto app. The law bars stablecoin issuers from paying holders interest for holding the coin.
The distinction comes from the product's legal status. SOFIE, which SoFi launched on 22 October, is a bank deposit with a token on top. The statute's definition of a payment stablecoin excludes deposits in plain words.
Why the stablecoin ban excludes deposits
The ban sits in section 4(a)(11) of the GENIUS Act, Public Law 119-27. It says no permitted payment stablecoin issuer shall pay a holder "any form of interest or yield". That applies solely in connection with holding, using or retaining the coin, and it binds the issuer of the coin.
Section 2 defines which assets fall outside the payment stablecoin category. The term "does not include a digital asset that" is a deposit, "including a deposit recorded using distributed ledger technology". A deposit written on a blockchain is still a deposit. Interest on it sits outside the ban by the statute's own wording.
SoFi's release describes the product in those terms. Each SOFIE represents $1 held on deposit at SoFi Bank, with funds FDIC insured up to applicable limits. It earns 4.40% APY.
The disclosures call SOFIE "a deposit liability of SoFi Bank, N.A." and state that "SOFIE is not a payment stablecoin". SoFi calls it the first and only national bank issued tokenized deposit for consumers.
Holders can convert SOFIE one for one into SoFiUSD, SoFi's stablecoin, to buy crypto or move money over blockchain rails 24 hours a day. The release never mentions the GENIUS Act or the yield ban. The link between the two comes from the statute's text.
How the rates compare
The 4.40% rate is not unique to the token. SoFi's own savings page posts 3.30% APY as of 20 October. It rises to 4.40% for up to six months on new accounts with eligible direct deposit.
The savings offer comes with conditions. A customer must open the account by 31 December 2027 and set up eligible direct deposit within 60 days. Savings customers can also earn a cash bonus of up to $400.
SoFi adds that if its variable base rate changes, the 1.10 point boost stays on top. The Act did not create that rate. The token carries a price SoFi chose.
The distinctive feature is the pairing of the two products. SoFi issues both SoFiUSD, a stablecoin, and SOFIE, a deposit. The statute says stablecoin issuers may not pay interest and that deposits fall outside the stablecoin definition.
A holder who wants interest sits in SOFIE and converts one for one when they want to trade. SOFIE's rate sheet gives an interest rate of 4.31368%, which compounds monthly to the 4.40% APY. Interest accrues daily on the end of day balance and is credited monthly.
What the funding costs SoFi
SoFi's second quarter earnings release gives its own funding costs. It paid an average 3.07% across all interest bearing deposits, 3.22% on savings and 3.82% on time deposits.
SoFi paid 4.63% on warehouse facilities, the credit lines that fund loans before sale or securitisation. The 4.31% interest rate on SOFIE is the figure to set against these costs.
On that base, SOFIE costs about 1.1 points more than savings. It costs 0.3 points less than warehouse debt. It sits 0.5 points above time deposits, the dearest deposit line.
On $1bn of balances that would otherwise have been savings money, the extra cost is about $10.9m a year.
What SoFi gets for paying up is deposit funding for a lender. Its loans yielded 9.42% in the second quarter. A SOFIE dollar lent at that yield leaves about 5.1 points before costs, against about 6.35 on an average deposit.
A SOFIE dollar earns a thinner margin than an average deposit, but still a wide one. Deposits are already SoFi's base, and total deposits grew $5.3bn in the second quarter to $45.5bn, on 15.8m members.
SOFIE gives crypto buyers a place to hold cash that earns interest inside SoFi Bank, where the release says stablecoin balances often earn nothing. Deposits are cheaper funding for a lender than warehouse debt, by 1.56 points. In the second quarter they cost 3.07% against 4.63%.
SOFIE can also be read as a way to grow the crypto business. SoFi held 388,336 crypto products, a product count and not a count of members.
Crypto transaction revenue of $134.3m cost $133.1m to earn, a net $1.2m.
SoFi's pitch is about idle money. Chief executive Anthony Noto says "too much money in the digital asset ecosystem is sitting idle". The release cites a Fed research estimate, in SoFi's wording, of about $64bn, or 21.2% of the stablecoin market, in inactive wallets.
Insurance limits and withdrawals
The risks sit on the bank side. The rate sheet says the rate is variable and can change at any time, with no limit on how much or how often. Funds are insured up to $250,000 per depositor, per insured bank, and there is no minimum balance.
SOFIE balances are not eligible for the SoFi Insured Deposit Program, according to the rate sheet. The extra FDIC cover of up to $3m that the savings page advertises does not apply to them.
SOFIE balances count toward the same $250,000 limit as the holder's other SoFi Bank deposits. A holder who leaves is making an ordinary bank withdrawal, which SoFi's treasury must fund. Large exits would test how steady this crypto sourced funding really is.
SoFi reports third quarter results on Tuesday 27 October, with a call at 8 a.m. ET. That quarter ended on 30 September, 22 days before SOFIE launched, so it holds no SOFIE balance.
The rollout to SoFi Crypto members runs through November. The first deposit total that includes SOFIE should therefore arrive with the fourth quarter report.