Japan’s Regulatory Hurdles Spur Exit from SBI-Zodia Crypto Custody Venture

Zodia Custody, a digital asset custody firm backed by Standard Chartered Bank, has concluded its joint venture with Japanese financial services giant SBI Holdings after two years of operations. The collaboration, named SBI Zodia Custody, was established with SBI holding a 51% stake and Zodia Custody the remaining 49%. The partnership aimed to deliver institutional-grade custodial services in the digital asset space, but both firms have now announced their strategic realignment.

Julian Sawyer, CEO of Zodia Custody, described the dissolution as a mutual decision driven by evolving priorities. “This is a strategic consensus reached between SBI and ourselves. We each have other priorities, and they have other priorities as well,” he stated. The joint venture had previously engaged in preliminary discussions with Japan’s Financial Services Agency (FSA) regarding potential local registration but had not yet submitted a formal application. According to Sawyer, the decision to end the venture was made before any regulatory filing process began, citing limited global resources as a key factor.

SBI Holdings, for its part, emphasized that the dissolution does not signal a retreat from its broader digital asset strategy. Kosuke Kitamura, a company spokesperson, stated that the move is “a proactive decision aimed at achieving synergies within the group at a faster pace within our digital ecosystem.” The firm has previously signaled expansion into crypto-related financial products, including a reported plan to launch a dual-asset cryptocurrency exchange-traded fund (ETF), though this claim was later denied.

Meanwhile, Zodia Custody is reportedly shifting its focus to markets with more favorable regulatory environments. The firm recently acquired Tungsten Custody Solutions in the United Arab Emirates, underscoring its broader strategy to expand its global footprint. Japan, however, continues to present challenges for international crypto firms. The country’s regulatory framework has been described as “slow, prescriptive, and risk-averse,” with critics noting that regulatory bottlenecks, rather than tax policies, are the primary barrier to innovation.

Japan’s regulatory environment remains a challenge for foreign crypto firms, with a cautious approach to digital asset oversight. Industry experts have pointed to the lack of a dynamic regulatory sandbox and the FSA’s pre-approval model as factors that discourage innovation. Even with potential changes, such as a proposed 20% flat tax on crypto gains, the regulatory environment remains a key hurdle.