SoFi has become the first nationally chartered bank to settle card transactions using stablecoins across Mastercard’s global network, with its full debit and credit card programme expected to process about $25bn annually.
The San Francisco-based financial firm began moving transactions through blockchain-based settlement on Tuesday, the companies said. The arrangement covers SoFi’s entire card operation and uses SoFiUSD, a stablecoin the company started issuing this year.
The launch follows a partnership between SoFi and Mastercard first announced in March. It marks a significant development in the use of bank-issued digital currencies within established payment systems.
SoFiUSD is backed primarily by cash reserves and can be exchanged for US dollars at a one-to-one rate, according to the announcement. The token is issued by SoFi Bank, N.A., which is supervised by the Office of the Comptroller of the Currency.
However, the companies stressed that SoFiUSD is not a bank deposit and is not protected by either FDIC or SIPC insurance.
“In six months, SoFi and Mastercard took stablecoin settlement from an idea to a live product that materially improves how money moves for businesses,” SoFi chief executive Anthony Noto said in a statement.
He added that the arrangement gives “businesses faster access to their money via the speed of blockchain, with the safeguards of a bank.”
Mastercard has been working to incorporate stablecoins into its existing payment infrastructure as banks, fintech companies and cryptocurrency issuers compete to develop blockchain-based settlement networks.
Stablecoins are digital assets designed to maintain a stable value, typically by being linked to a conventional currency such as the US dollar. Their use in settlement can allow transactions to be recorded and transferred on blockchain networks rather than through traditional payment processes.
For SoFi, the Mastercard arrangement is intended to be the beginning of a wider expansion. The company said it was discussing similar settlement options with large retailers and technology platforms.
SoFi also said it planned to explore further uses with Mastercard, including cross-border payments and remittances.
The companies did not provide a separate breakdown of how the $25bn annual estimate is divided between debit and credit transactions. The full card programme will use SoFiUSD settlement under the newly launched arrangement.
