Crypto currencies are getting more popular. The prices of various cryptocurrencies have increased by at least 100% in the past few months, with some seeing a rise of over 400%. China has launched its own digital currency. Coinbase, a cryptocurrency exchange, has recently launched its initial public offering, became listed on Nasdaq and was valued at over $100 billion. Those events point to an ongoing change in the global financial landscape, particularly towards distributed finance. The changes are not lost on Japan, which plans to launch its own blockchain based exchange.
New block-chain based trading platform in Osaka
Two Japanese firms, SBI Holdings and Sumitomo Mitsui Financial Group, have announced their plans to launch a digitized blockchain based exchange in Osaka. The new platform will compete with Tokyo Stock Exchange (TSE) according to sources. The Osaka platform will mostly list digital securities, for which the demand is growing, and will allow trading outside of traditional trading hours (trading on bitcoin is already allowed during the weekend on many exchanges). In addition to digital tokens, the exchange will allow trading of stocks as an alternative to existing methods for Japanese traders such as direct buying or trading via financial derivatives.
The new platform will be a joint venture in which both companies will invest, with SBI Holdings investing a majority share of 60% and Sumitomo Mitsui Financial Group investing 40%. SBI will have a decisive sway over decisions based on this structure.
The decision of the two companies is most likely driven by the awareness of increasing demand not only for digital assets and securities, but also for the need for alternative financial solutions. Bitcoin, the first instrument built on the blockchain technology, has shown that this technology offers many benefits in terms of transparency and trust (although the technology still has some issues to address). The new exchange in Osaka, named the Osaka digital exchange (OSX), will most likely address issues of speed of transactions and offer a technology that is convenient for use by the mass public.
Details are still missing
Despite the ambitions, many details around the new exchange are yet to be clarified. The two companies plan to launch the exchange in spring 2022, which is a rather distant point in the future. Digital enthusiasts will need to wait for more details regarding other milestones.
A part of a bigger strategy
This joint venture is only one of the many initiatives the two companies are taking to move closer to digitized finance. Back in August 2020, Sumitomo Mitsui Financial Group, the holding company of SMBC, bought 14% of the total equity of the blockchain firm SBI R3 Japan. Currently, SBI Holdings still has a 51% stake (previously 60%) and R3 has 35% (previously 40%) in the technology developer.
SBI’s efforts to accelerate the transition to digital finance extend beyond Japanese borders. It already has agreements about other ventures in digital assets with the exchange in Stuttgart, and Switzerland’s Swiss Digital Exchange. In Japan, it also has its eye on another exchange in Osaka, called Osaka Dojima Commodity Exchange.
Japanese investors are aware of the trends taking place and have plans to capitalize on them. Their ventures are important steps in the right direction, but they have a lot of catching up to do.