What happened

Shares of digital bank SoFi Technologies (SOFI -2.63%) traded nearly 6.5% lower in the final hour of trading today after members of the U.S. Senate Banking Committee sent a letter to the company regarding its crypto activities. The committee also sent a letter on the matter to various bank regulators.

So what

The U.S. Senate Banking Committee is specifically looking into whether SoFi's crypto activities are in compliance with U.S. banking and consumer protection laws.

At the start of this year, SoFi completed its acquisition of a small bank called Golden Pacific Bancorp in order to obtain a bank charter, which would enable it to hold deposits and originate loans inside the bank.

As part of its approval of the deal, the Federal Reserve said in a letter that "SoFi is currently engaged in crypto-asset related activities that the Board has not found to be permissible" through its subsidiary SoFi Digital Assets, which enables users to buy and sell crypto.

According to the Senate Banking Committee, the Fed gave SoFi two years to divest this subsidiary or get into compliance with the law, although the Fed can grant extensions to SoFi after this two-year period.

The Fed also stated that during this two-year period SoFi had agreed to not increase the "types of [crypto] products and services offered." The committee is concerned that SoFi has in fact done this by allowing customers to invest some of their direct deposits into cryptocurrencies with no fees.

The committee is also concerned about whether SoFi is holding the appropriate amount of capital for digital assets on its balance sheet and if it's being careful enough over which crypto assets it allows customers to buy and sell. Customers can buy and sell more than 30 cryptocurrencies through SoFi's online brokerage.

Now what

This inquiry is likely in response to the FTX debacle, which has put regulators and lawmakers on edge. 

Clearly, there is a lot going on and I am not sure exactly which activities SoFi was engaged in that the Fed did not find permissible. But I do think it's unlikely that SoFi would knowingly offer crypto services that violated its agreement with the Fed. 

I'd be more worried about the number of cryptocurrencies SoFi offers to customers. Some brokerages like Robinhood Markets offer much fewer cryptocurrencies and go very slowly when onboarding new ones to make sure they are not offering unregistered securities.

The Senate Banking Committee has asked SoFi's CEO, Anthony Noto, to respond to its inquiries, and I'm sure the company will do so in the near future.