Bitbank Prepares for IPO

The cryptocurrency industry has begun to move in anticipation of new capital inflows

Bitbank is a cryptocurrency exchange that began its service in 2014. It is operated by Bitbank Co., Ltd. It has been leading the domestic Web 3.0 industry for nearly 10 years, including installing Japan's first Bitcoin ATM and launching the "bitcheck wallet" wallet service, which allows users to purchase cryptocurrency with a credit card.

In September 2021, the company announced that it would raise a total of 7.5 billion yen from Mixi Co., Ltd., known for operating "mixi," the pioneer of SNS in Japan, and developing the game app "Monster Strike," and Ceres Co., Ltd., which operates multiple web media. In addition, it has entered into a capital and business alliance with Mixi and is currently an equity method affiliate of the company.

Bitbank Co., Ltd.'s preparations for listing on the stock exchange, which were suddenly announced on July 31, 2024, were announced in Mixi's IR information. Currently, Bitbank's shares are held by Mixi, Inc. at 26.99% and Ceres, Inc. at 23.05%. Bitbank CEO Hirosue Noriyuki holds 30.69%.

Looking back, the industry was also shaken five years ago when rumors of a cryptocurrency exchange, bitFlyer, going public were circulating. However, these rumors have not yet come to fruition, and as an alternative, Coincheck, an exchange under the Monex Group, is aiming to go public in the US through a "SPAC listing (see page 20 for details)".

In this situation, the news that a super-large company like Mixi is aiming to go public on a cryptocurrency exchange, and on the Tokyo Stock Exchange, is a sign that the evaluation of cryptocurrency exchanges in Japan has moved to the next phase.

One of the triggers for this movement was the listing of a Bitcoin spot ETF in the US, which was introduced on the previous page. With the possibility of large amounts of capital flowing into the cryptocurrency market from investors other than the cryptocurrency enthusiasts who have supported the market up until now, each company has begun to move actively with the aim of becoming a leading company of the next era.

Characteristics of Japanese institutional investors

●54% of the total intend to invest in crypto assets

●25% of institutional investors are negative about crypto assets

●Bitcoin and Ethereum are the most popular stocks

What is needed is to gain the trust of institutional investors

So why are cryptocurrency exchanges aiming to go public? The reason is that the presence of institutional investors requires a different monetization method than before. In fact, Coinbase, a cryptocurrency exchange that became the first in history to go public on the US NASDAQ in 2021, earns about 50% of its revenue from sources other than cryptocurrency trading. Custody fees are particularly growing.

Custody is a financial term that refers to the business of storing and managing securities on behalf of investors. In the cryptocurrency industry, where there is no physical asset, they even act as an agent to issue new wallets and store private keys for investors. It is hard to imagine for people who manage cryptocurrency individually, such as entrusting the private key of a wallet to someone else, but this phenomenon is likely due to the listing and the entry of a variety of institutional investors into the market. It seems that each institutional investor is requesting custody from Coinbase as a risk hedge.

In Japan, the revised Payment Services Act, which came into force in May 2020, allows cryptocurrency exchange operators to carry out cryptocurrency custody services. For institutional investors who have large amounts of funds under management and heavy responsibilities to their customers, dealing with cryptocurrencies, which are still unknown (or considered to be unknown), is extremely risky. That is why having a cryptocurrency exchange take on custody services can help hedge risks. The brand of being listed on the Tokyo Stock Exchange will make a company that is looking to deposit funds even more attractive. Listing as a cryptocurrency exchange will be a great appeal to institutional investors and lead to business expansion.

Naturally, the stock listing is subject to approval from the relevant authorities. Therefore, Mixi states that "the planned timing and market for listing have not been decided, and depending on the results of the review in the stock listing preparation process, we may conclude that the company's stock listing will be canceled."

Summary

・The emergence of cryptocurrency ETFs has led to the expectation of an influx of funds from institutional investors

・Cryptocurrency ETFs have not yet been approved in Japan, but funds are needed to develop the business

・We want to gain the market's trust by showing management transparency through listing

Glossary

Cryptocurrency exchange: A platform for buying, selling, and exchanging cryptocurrencies online. In Japan, operators are required to register with the Financial Services Agency.

NASDAQ: The world's first electronic stock exchange, run by the National Association of Securities Dealers. It has a high proportion of high-tech and IT-related companies, and many Web 3.0-related businesses.

Wallet: A place where cryptocurrencies are stored. It is necessary to open some kind of wallet for cryptocurrency trading.

Fundamentals: An index created to show the economic situation of a nation or company. The analysis method varies depending on the individual economic situation.

Counterparty risk: The possibility of suffering losses due to the counterparty's low credit risk and breaching the contract.

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