BitFlyer Acquires FTX Japan to Expand Crypto Custody Services

BitFlyer Holdings, Inc., a prominent Japanese cryptocurrency exchange, has entered into an agreement to acquire FTX Japan K.K., marking a significant development in the cryptocurrency industry. This acquisition comes in the wake of the collapse of FTX Trading Ltd. and its affiliated entities in November 2022, which led to a Chapter 11 bankruptcy filing in the United States.

The acquisition, subject to approval by the U.S. Bankruptcy Court for the District of Delaware, is expected to be finalized following a hearing scheduled for July 17, 2024. Upon completion, FTX Japan will undergo a corporate rebranding, with its new name yet to be determined. For the interim, it is being referred to as “New Custody Company.”

BitFlyer’s strategic vision for the acquired entity involves a shift in its core business model. While FTX Japan primarily operated as a cryptocurrency exchange, the new entity will focus on providing institutional-grade crypto custody services. This pivot reflects the growing demand from institutional investors entering the cryptocurrency market and the need for enhanced security measures in the wake of recent high-profile security breaches in the industry.

The acquisition plan outlines several key objectives:

  1. Transfer of customer accounts from FTX Japan to BitFlyer, Inc., subject to customer consent.
  2. Development of new crypto custody services as the primary business focus.
  3. Potential expansion into services related to crypto asset spot ETFs, contingent on future regulatory developments in Japan.
  4. Maintenance of crypto asset exchange service provider and Type 1 financial instruments business licenses, as deemed necessary.

BitFlyer’s decision to acquire FTX Japan aligns with the broader trend of consolidation and restructuring within the cryptocurrency industry following the FTX collapse. The move is expected to strengthen BitFlyer’s position in the Japanese market, where cryptocurrency adoption has seen significant growth.

The acquisition is reportedly valued at several billion yen (tens of millions of dollars), underscoring the significant investment BitFlyer is making in expanding its services and market presence. As of the announcement, BitFlyer ranks 22nd among global exchanges by trading volume, with a 24-hour trade volume of approximately $73.11 million, primarily driven by BTC/JPY transactions.

In preparation for stricter cryptocurrency regulations in Japan, BitFlyer has already implemented enhanced anti-money laundering rules in line with the Financial Action Task Force’s (FATF) Travel Rule. These measures include restrictions on deposits and transfers to counterparties not part of the Travel Rule Universal Solution Technology (TRUST) network, demonstrating BitFlyer’s commitment to regulatory compliance.

The acquisition of FTX Japan by BitFlyer represents a strategic move in the evolving cryptocurrency landscape, potentially setting a precedent for further industry consolidation and the development of more sophisticated custodial services for institutional investors. As the cryptocurrency market continues to mature, such acquisitions and pivots in business models may become increasingly common, shaping the future of the digital asset ecosystem.