Following the acquisition, FTX Japan will be renamed and operate a crypto custody service that will feature crypto ETFs once such products are allowed in Japan.

Japanese cryptocurrency exchange BitFlyer is set to acquire the Japanese arm of the defunct crypto trading platform FTX. This acquisition marks a significant development in the ongoing restructuring and asset redistribution following the collapse of FTX.

Details of the Acquisition

Acquisition and Rebranding:
- Announcement Date: June 20
- Rebranding: FTX Japan will be rebranded initially as New Custody Company, with a final name yet to be determined.
- New Focus: The core business of FTX Japan will transition from operating a crypto exchange to providing institutional-grade crypto custody services.

Strategic Shift:
- Institutional Custody Services: The rebranded entity will focus on secure crypto custody services tailored for financial institutions.
- Crypto ETFs: BitFlyer plans to provide services related to crypto exchange-traded funds (ETFs) through New Custody Company once the necessary legal and regulatory frameworks are established in Japan.

Customer Transition:
- Account Transfer: FTX Japan’s customer accounts will be transferred to BitFlyer, subject to the customers' consent.

Financial Details

Acquisition Cost:
- Estimated Cost: BitFlyer reportedly spent billions of yen, amounting to tens of millions of dollars, to acquire FTX Japan.

Background and Context

FTX Japan:
- Formerly Liquid: FTX Japan was initially known as Liquid before being acquired and rebranded by FTX in early 2022.
- Post-FTX Collapse: After FTX's bankruptcy in November 2022, FTX Japan managed to safeguard customer assets and resumed withdrawals by February 2023, highlighting its operational independence from FTX’s broader financial issues.

Broader Implications

FTX's Acquisition History:
- Voyager Digital: In 2022, FTX acquired crypto brokerage firm Voyager Digital for $1.4 billion.
- Bankruptcy Settlements: In April 2024, a U.S. judge approved a $450 million settlement between FTX debtors and bankrupt Voyager.

Legal Fallout:
- Sam Bankman-Fried: The founder of FTX, Sam Bankman-Fried, was sentenced to 25 years in prison in the U.S. after being convicted on seven felony charges.

Future Prospects

Market Impact:
- Enhanced Security: By transforming FTX Japan into a custody service, BitFlyer aims to provide robust security solutions for institutional investors, potentially increasing confidence in the Japanese crypto market.
- Regulatory Readiness: BitFlyer’s plan to offer ETF-related services aligns with Japan’s evolving regulatory landscape, positioning the company to capitalize on future market opportunities.

Conclusion

BitFlyer’s acquisition of FTX Japan and its strategic shift towards institutional custody services reflect a significant move in the crypto industry, particularly in Japan. This development not only showcases BitFlyer's growth ambitions but also illustrates the broader trend of consolidation and specialization within the crypto sector following high-profile collapses like that of FTX.