What Financial Sphere Will SoFiUSD Build? (Part 1) — The Future Where Bank Deposits and Stablecoins Merge
[Series Common Theme]
The Future Landscape of Stablecoins — Which Currency Will Dominate Which Financial Sphere?
*This is a continuation from the following.
Part 1: How Many Stablecoins Will Survive? — Why It Won't Be a Winner-Takes-All Scenario
Part 2: Why Is Stripe Creating a New Dollar? — The Future of Financial Infrastructure Envisioned by the Collison Brothers
Part 3: Why Does Stripe Want PayPal? — The True Objective Behind the $53 Billion Acquisition Proposal
Part 4: Where Will USDT, USDC, and Community-Type Stablecoins Survive?
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So far, we have looked at the major camps attempting to survive in the stablecoin market.
USDT possesses overwhelming liquidity, while USDC has the power to connect multiple blockchains and financial services, using interoperability as its weapon. Additionally, Open USD has the strength of the corporate payment infrastructure built by Stripe, and USDG has the track record of issuance and regulatory compliance cultivated by Paxos.
So, which financial sphere will SoFiUSD dominate?
SoFiUSD also has the potential to grow into one of the world's leading stablecoins. However, to achieve that, the first thing it must build is a financial sphere that is difficult to replace elsewhere. If a robust financial sphere can be established, adoption by users and companies will spread, and as a result, the issuance balance will follow.
The starting point for this is “between bank deposits and public chains.” Send dollars from a bank account to a public chain when needed, and return them to bank deposits once their role is finished.
・Move them anywhere in the world 24/7/365
・Use them for payments and investments
・Return them to bank deposits again when necessary
Completing this cycle within a single financial group is where SoFiUSD can build its financial sphere.
<Not Just Bank-Issued>
When talking about SoFiUSD, the first point of attention is that it is bank-issued.
The backing assets for SoFiUSD consist mainly of cash held in FRB accounts and are subject to supervision by the OCC. For this reason, the SVB shock—a situation where “credit anxiety regarding reserves” becomes an issue—is structurally unlikely to occur. Furthermore, the issuance, reserves, and redemption of SoFiUSD are handled by a bank under U.S. banking regulations.The fact that the responsibility for everything from issuance to redemption is clear and a consistent management system can be maintained is a unique strength of the bank-issued type.
However, the true value of SoFiUSD is not limited to that.
SoFi possesses deposits, loans, cards, investments, crypto assets, international remittances, and corporate financial services all within a single financial service platform. SoFiUSD can become the currency that flows at the center of it all.
It is highly significant that a bank with various services has issued a stablecoin that connects them all.
<Deposits and Stablecoins Are Not Competitors>
When viewed as financial products, deposits and stablecoins have long had a trade-off relationship.
・Deposits are safe and come with interest and deposit insurance. However, transfers are slow and expensive.
・Stablecoins are fast and cheap for transfers. However, they lack interest and deposit insurance.
SoFi does not make the two compete, but rather seeks to merge them, presenting a roadmap for a mechanism that allows for mutual conversion between tokenized deposits subject to interest and insurance, and SoFiUSD.
Normally, you hold them as tokenized deposits, and only use them on-chain as SoFiUSD when transfers or payments are necessary. And once their role is finished, they return to tokenized deposits.
Users do not need to be conscious of the difference when operating them. Assets automatically move back and forth in the optimal form according to the purpose. What SoFi is aiming for is the financial infrastructure that supports such a financial experience.
<Connecting a Customer's Financial Life>
How will it actually be used in daily financial life?
Taking a single SoFi member as an example:
・Salary is deposited into a SoFi deposit account
・Sending money to family or acquaintances
・Allocating funds for loan repayments
・Paying for card purchases
・Transferring funds to an investment account
While using these financial services, users do not need to be conscious of switching between tokenized deposits and SoFiUSD. The system automatically switches to the optimal form according to the purpose, such as using tokenized deposits for holding funds and SoFiUSD for remittances and payments.
Furthermore, a world is coming where these fund transfers will be executed automatically according to set conditions. SoFiUSD will become the common payment infrastructure that supports a series of fund movements behind the scenes.
And as various financial services connect smoothly, the one-stop service that SoFi advocates will begin to hold even greater value.
The strength of SoFiUSD lies in its ability to create an environment where SoFi customers naturally use SoFiUSD in their daily financial activities.This point differs significantly from Open USD or USDG. SoFiUSD has its own initial place of use.
<When It Connects to Loans, the Landscape Changes>
SoFi's strengths, lending and the stablecoin business, are in a relationship that creates a single cycle of funds.
・Banks collect deposits and turn them into loans
・Borrowers receive money and make monthly repayments
・Repaid funds return to the bank's balance sheet again
Currently, this flow is strongly dependent on bank business hours and existing payment networks. If SoFiUSD is incorporated here, the way funds move will change.
・Sending loan funds 24/7, 365 days a year
・Borrowers use that money directly for payments and remittances on-chain
・Repayment funds are quickly connected to distributions to investors and financial institutions, and to the next loan
・Cross-border loans and debt trading will also become more efficient
SoFiUSD has the potential to more seamlessly connect the entire loan lifecycle, from loan execution and collection to the sale of debt and distribution to investors.
Also, loans involve relationships with customers that last for several years, or several decades in the case of mortgages. If SoFiUSD is incorporated into that long-term financial relationship, it can become a financial infrastructure that is used continuously, rather than just a temporary means of remittance.
Up to this point, we have looked at what role SoFiUSD plays in personal finance, centered on SoFi members.
However, the financial sphere that SoFiUSD aims for is not limited to that.
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