Sumitomo Mitsui Trust to set up a Digital Asset Custodian Company


Key Takeaways:

  • Sumitomo Mitsui Trust Holdings intends to establish the “Japan Digital Asset Trust” (JADAT) as a trust organization to manage digital assets and is expected to launch by the end of the year.
  • It will collaborate with local cryptocurrency exchange Bitbank, which will own 85 percent of the joint venture.
  • The Japan Digital Asset Trust will start with $2.3 million and expects to grow to $78 million with additional investment.

Sumitomo Mitsui Trust will establish a firm this year to offer institutional investors digital asset custody services, a step it sees as critical in establishing the infrastructure needed to properly manage digital asset investments.

For wealthy investors and organizations, the proposed company will hold digital assets such as cryptocurrency and non-fungible tokens (NFTs). Sumitomo Mitsui Trust contends that entrusting digital assets to well-established financial organizations like itself will make investors feel more secure about owning and investing in them. Institutional investment in such assets has been hampered by the possibility of theft.

Among the first implementations will be cryptocurrency custody, which will combine Bitbank’s crypto expertise with Sumitomo Mitsui’s know-how. In the future, the corporation may contemplate launching a stablecoin.

Japan Digital Asset Trust will be a partnership with Bitbank, a bitcoin exchange based in Tokyo, owning 85%, and Sumitomo Mitsui Trust owning 15%.

It will start with 300 million yen ($2.3 million) in capital and intends to raise enough money from additional investors to grow to 10 billion yen ($78 million).

The move to establish the unit comes after Japanese rival Nomura (NMR) announced earlier this month that it is developing a subsidiary that will provide institutional clients with access to cryptocurrency. It also reflects a global movement toward the asset class, with institutions like BNP Paribas using JP Morgan’s (JPM) blockchain-based Onyx network for fixed income trading.

Sumitomo Mitsui was involved in the Securitize platform’s launch of a blockchain security token a year ago.

SBI Group and MUFG are two more Japanese banking institutions that are boosting their digital asset holdings. With a cryptocurrency exchange, SBI VC Trade, a Bitcoin miner, SBICrypto.com, and ownership of wholesale crypto liquidity network B2C2, SBI is the most established. The SBI NFT marketplace is also run by it. It also has significant security token initiatives, including ambitions to build the Osaka Digital Exchange.

MUFG has a security token platform called Progmat. This was recently expanded to include utility tokens, and it now serves as a platform for several banks to issue stablecoins. The Japanese bank recently teamed with Animoca Brands, the web3 game and metaverse leader, for non-fungible tokens (NFTs).

Sumitomo Mitsui Trust’s new joint venture envisions a separate business: creating a yen-denominated stable coin. Trust banks, banks, and money transfer service operators are permitted to issue such coins by the Financial Services Agency.

As the metaverse — more robust cyberspace that incorporates virtual reality and other interactive technologies — takes off, Japan Digital Asset Trust expects demand for stable currencies to rise.

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