Japanese Bank to Launch Bitcoin and Digital Asset Company

Sumitomo Mitsui Trust is one of Japan's largest banks in the country and aims to offer more services for institutional investors. The new company will be the custodian of digital assets like Bitcoin, cryptocurrencies, and non-fungible tokens for large investors and corporations. 

The bank believes investors would feel more comfortable owning and investing in digital assets if the assets can be entrusted to well-established financial institutions such as themselves. 

Bitcoin, cryptocurrencies, and NFTs require private keys that are long strings of numbers and letters to verify ownership. Loss or theft of these keys could result in a loss of assets and the company believes that the risk of theft has been a barrier to entry for institutional investment.

Japan Digital Asset Trust will be a joint venture where Tokyo-based Bitbank owns 85% of the newly found company. Additionally, Sumitomo Mitsui Trust will hold a 15% stake. The two will collaborate in order to build a robust security system for Japan Digital Asset Trust. 

Especially in the U.S., the precedent of this business model already exists and is opening the doors to institutional investors. Institutional investments in Bitcoin and other digital assets are facilitated by large asset managers like Fidelity which offer custodial services. 

In 2021, institutions traded $1.137 trillion worth of Bitcoin and cryptocurrencies which is double the value traded by retail investors that same year.

The new joint venture by Sumitomo Mitsui Trust is already looking downstream to supplement its digital asset custodial business by issuing a yen-denominated stablecoin. Japan Digital Asset Trust will issue the stablecoin due to its anticipation that the demand for stablecoins will increase as the “metaverse” and virtual reality technologies take off.