Zodia Custody Japan: Crucial Venture Ends with SBI Amid Regulatory Shifts

The cryptocurrency landscape continually evolves, bringing both exciting opportunities and significant challenges. Recently, a major development unfolded in the Asian market. Zodia Custody, a prominent digital asset custody firm, has ended its two-year joint venture in Japan with SBI Holdings. This decision, described as a mutual and strategic realignment, highlights the complexities of operating in the highly regulated crypto market Japan.

Zodia Custody Japan Venture Dissolves

Standard Chartered-backed Zodia Custody has officially dissolved its partnership with Japan’s SBI Holdings. This venture, known as SBI Zodia Custody, aimed to bring institutional-grade custodial services to the digital asset space in Japan. SBI Holdings held a 51% stake, while Zodia Custody owned 49%. Both companies framed the separation as a strategic move. Julian Sawyer, CEO at Zodia Custody, reportedly explained the decision to Bloomberg. He noted, “This is a strategic alignment between SBI and ourselves as a mutual decision that we have other priorities and they have other priorities.” This mutual agreement signals a shift in focus for both entities.

Navigating Japan Crypto Regulation: A Key Factor

The regulatory environment played a significant role in this strategic decision. Zodia Custody had engaged in discussions with Japan’s Financial Services Agency (FSA). These talks focused on securing local registration for the venture. However, a formal application was never submitted. Sawyer clarified that the decision to dissolve the partnership occurred before any regulatory filing. Therefore, the venture did not proceed with a full application. This situation underscores the rigorous nature of Japan crypto regulation, which often presents hurdles for foreign firms.

The SBI Zodia Custody project, which has now dissolved. Source: SBI Zodia Custody website

SBI Holdings Crypto Strategy Remains Robust

Despite the dissolution, SBI Holdings maintains a strong commitment to the digital asset space. Kosuke Kitamura, a spokesperson for SBI Holdings, emphasized that the exit is not a retreat. He stated, “[It’s a] proactive decision aimed at pursuing group-wide synergies with greater speed under our digital ecosystem.” This suggests SBI is streamlining its operations to achieve broader objectives. The firm continues to explore various avenues within the digital asset sector. For instance, reports last month suggested SBI Holdings planned to launch Japan’s first dual-asset cryptocurrency exchange-traded fund (ETF). Although the firm later denied these specific reports, it highlights SBI’s ongoing interest in innovative crypto offerings.

Zodia Custody’s Global Shift for Digital Asset Custody

Meanwhile, Zodia Custody is actively expanding its presence in other global markets. The firm recently acquired Tungsten Custody Solutions in the UAE. This move signifies a strategic pivot towards jurisdictions with more accommodating regulatory frameworks. Zodia Custody’s focus on favorable environments allows it to enhance its digital asset custody services. This global strategy aims to capitalize on burgeoning crypto markets worldwide. The company continues to provide secure, institutional-grade custody solutions across different regions.

The Challenges of the Crypto Market Japan

Japan has long been recognized as a challenging market for foreign crypto companies. Its cautious and prescriptive regulatory approach often deters international players. Maksym Sakharov, co-founder and CEO of WeFi, offered insights into these difficulties. He explained that Japan’s regulatory bottlenecks, rather than tax policies, are the primary reason for crypto innovation leaving the country. Even with proposals for a 20% flat tax on crypto gains, the core issue persists. Sakharov noted, “The FSA/JVCEA pre‑approval model and the absence of a truly dynamic sandbox are what keep builders and liquidity offshore.” This rigorous approval process slows down market entry and innovation significantly. Therefore, the crypto market Japan faces ongoing hurdles in attracting and retaining global firms.

Ultimately, the departure of Zodia Custody Japan from its venture with SBI Holdings reflects a broader trend. Institutional crypto firms seek clarity and efficiency in regulatory frameworks. This strategic realignment by Zodia Custody and SBI Holdings underscores the dynamic nature of the global digital asset industry. It also highlights the persistent challenges within the Japanese market. As both companies pursue their independent strategies, the future of digital asset custody in Asia remains a key area of observation.