Japan FinTech Observer #75

Welcome to the seventy-fifth edition of the Japan FinTech Observer.

With the WebX 2024 conference making its mark, this was the week of blockchain and Web3 announcements: Sony’s Soneium, LINE’s and Kakao’s Kaia, Oasys raising funds from SBI Holdings, and the launch of the DCJPY stablecoin (tokenized deposits) were the highlights we picked.

We will host the Japan FinTech Observer weekly call again tonight, as every Monday, starting at 8pm JST on LinkedIn Audio. You can find this week’s event here.

Otherwise, here is what we are going to cover this week:

• Venture Capital & Private Markets: double jump.tokyo has secured over USD 10m in funding in its Series D first closing, with SBI Investment leading the round and participants including Sony Group Corporation, Taisu Ventures, Gate Ventures, TM Capital, Bing Ventures; Oasys has formed a strategic partnership with SBI Holdings, and secured funding; Saison Capital, which led Helicap’s Series A in 2020, also participates in its Series B; 400F, which operates “Okaneko,” one of Japan’s largest household financial diagnosis and consultation services, has raised a total of JPY 1.14bn; Creattura has raised JPY 350m in a Series A First Close financing from DBJ Capital and Mitsui Sumitomo Insurance Capital; Bee Informatica has completed a seed round, raising a total of JPY 71m through third-party allotment with Delight Ventures as the lead investor
• Banking: Teppei Wakabayashi’s “2024 Startup Debt Chaos Map” is out; MUFG Bank will provide TOCOM power futures trade execution and clearing services and has invested in a 49% stake in eClear; Sumitomo Mitsui Financial Group announced that its subsidiary, Plaritown, and freee have jointly established Incloop
• Payments: DeCurret DCP, GMO Aozora Net Bank, and Internet Initiative Japan announced that IIJ has started digital assetization of environmental values and settlement transactions in the digital currency DCJPY
• Capital Markets: Unwinding of Cross-Shareholdings: MS&AD participates in Toyota’s tender offer; Tokio Marine completes buyback of 10m shares; SBI Holdings will transfer 14.8% of its shares in Japannext Securities to Cboe; the Tokyo Stock Exchange’s Asia Startup Hub has added primarily venture capital and corporate venture capital partners in August
• Digital Assets: Sony Block Solutions Labs has launched Soneium Minato, a new Ethereum layer-2 solution; Pyth Network deployed Pyth Price Feeds on the Soneium blockchain; what does the Soneium launch mean for ASTR holders; “Finschia,” the successor to LINE’s independently developed “LINE Blockchain,” and “Klaytn,” developed by Kakao’s subsidiary Ground X, have been integrated into a new blockchain called “Kaia”
• The Last Word: Poor Japan

WebX 2024 — Bitwise: The path to Bitcoin ETF approval

During WebX 2024, I had the honor of moderating a discussion on “ETFs and Digital Assets” with Katherine Dowling, General Counsel & Chief Compliance Officer at Bitwise Asset Management, and Henry Zhang, Founder & CEO of DigiFT.

Coinpost focused in its reporting on the Bitcoin ETF:

Bitwise is a US asset management company offering Bitcoin spot ETFs and other products, with employees who have previously gained experience at companies like BlackRock, Meta, Google, and others. Leveraging their expertise in the Bitcoin ETF listing applications, they also launched the Ethereum spot ETF “AETH” at the end of July. Katherine emphasized that this SEC approval, so shortly after the Bitcoin ETF, came as a bit of a surprise to the industry.

Venture Capital & Private Markets

• double jump.tokyo has secured over USD 10m in funding in its Series D first closing, with SBI Investment leading the round; participating investors include Sony Group Corporation, Taisu Ventures, Gate Ventures, TM Capital, Bing Ventures, and a high-profile entity that wished to remain anonymous; the capital will be deployed to further develop and support blockchain games, blockchain infrastructure, and related services, as well as to strengthen the company’s organizational structure and talent base
• Oasys has formed a strategic partnership with SBI Holdings, one of Japan’s largest financial conglomerates, and has successfully secured funding; leveraging all the resources of the group, Oasys will work to improve the liquidity of OAS tokens and strengthen the growing Oasys ecosystem; previously, Oasys has collaborated with the SBI Group in various ways, including by listing OAS tokens on SBI VC Trade in May 2023 and by integrating with SBINFT Market
• Saison Capital, the venture capital arm of Credit Saison Co., Ltd., which led Helicap’s Series A in 2020, continues its support of the investment platform by participating in the equity portion of Helicap’s Series B; Helicap has raised USD 4.3m in its ongoing Series B funding round, with Kenanga Investors Berhad, a subsidiary of Malaysia’s Kenanga Investment Bank, the lead investor, contributing US$4 million to the round; additionally, Helicap is set to issue USD 1.9m worth of shares to convertible noteholders, which include Taisu Ventures and individual investor Lee Ooi Keong
• 400F, which operates “Okaneko,” one of Japan’s largest household financial diagnosis and consultation services, has raised a total of JPY 1.14bn; this funding was secured through a third-party allotment with JP LIFE NEXT FUND, operated by Kampo Next Partners, as the lead investor, along with existing investor Aflac Ventures Japan K.K., Yucho Spiral Regional Innovation Fund (the CVC of Japan Post Bank, operated by Spiral Innovation Partners), and SUMISEI INNOVATION FUND (the CVC of Sumitomo Life Insurance Company, operated by SBI Investment); additionally, debt financing was obtained from Japan Finance Corporation and Mizuho Bank
• Creattura, which supports companies in reducing greenhouse gas emissions by developing and providing carbon credits and facilitating the introduction of renewable energy, has raised JPY 350m in a Series A First Close financing from DBJ Capital and Mitsui Sumitomo Insurance Capital; Creattura plans to use these funds to accelerate expansion of the business, for international project development and IT product development
• Bee Informatica, which operates “Funding Bee,” a digital microfinance solution for small businesses in Malaysia with the mission of “creating a world where all small businesses are fairly evaluated and can access finance,” has completed a seed round, raising a total of JPY 71m through third-party allotment; the lead investor is Delight Ventures, along with CVCs and angel investors including ForDigit, Luatsu, Agent, and 10 others; Bee Informatica’s cumulative funding since its establishment has now reached approximately 110 million yen

Banking

• On his Twitter, Teppei Wakabayashi published the “2024 Startup Debt Chaos Map”, including Venture Debt, Revenue-Based Financing (RBF), Factoring, BNPL, and Business Loan providers
• MUFG Bank has obtained approval for participant qualifications in the energy market from both the Tokyo Commodity Exchange (“TOCOM”) and the Japan Securities Clearing Corporation, in preparation for commencing power futures trade execution and clearing services; additionally, MUFG Bank has decided to invest in a 49% stake in eClear, a subsidiary of enechain, and has concluded an agreement with eClear to this effect; as a result, eClear will become an equity-method affiliate of the Bank
• Sumitomo Mitsui Financial Group announced that its subsidiary, Plaritown, and freee have jointly established Incloop, a company that provides SaaS implementation support services and BPR consulting services; Incloop will commence operations in late September; Plaritown holds 85% of Incloop, while freee holds 15%
• Sumitomo Mitsui Financial Group has consolidated its previously separate reports on climate change, nature capital, human rights into a single “Sustainability Report“, including a summary of their human resource strategy as employee form the basis of SMBC Group’s competitiveness, to outline their strategic direction toward these social issues; this report is structured according to the four components recommended by international sustainability disclosure standards: governance, strategy, risk management, and metrics and targets

Payments

• DeCurret DCP, GMO Aozora Net Bank, and Internet Initiative Japan announced that IIJ has started digital assetization of environmental values (digitization, storage and distribution of assets such as non-fossil certificates on the DCJPY Network’s Business Zone) and settlement transactions in the digital currency DCJPY (a digital currency in which bank deposits are tokenized on the blockchain, i.e. tokenized deposits) minted by GMO Aozora Net Bank in the DCJPY Network, a system released by DeCurret DCP for production verification this July
• Very timely in relation to the above announcement, the Bank of Japan has taken on “Deposit Tokenization: Survey of Overseas Initiatives” in the latest edition of its Review

Capital Markets

• Unwinding of Cross-Shareholdings: MS&AD & Toyota; as a result of a Tender Offer conducted in July/August, 79,900,000 shares out of 94,690,635 shares of common stock of Toyota Motor tendered by Mitsui Sumitomo Insurance and 4,352,800 shares out of 5,158,520 shares of common stock of Toyota Motor tendered by Aioi Nissay Dowa Insurance will be purchased by Toyota Motor; with that, MS&AD Insurance Group holds 215,294,455 shares (Ownership Ratio of Toyota Motor’s Shares: 1.60%) after the tender offer
• Tokio Marine completes buyback of 10m shares: as a result of a Tender Offer conducted in July/August, Tokio Marine spent nearly JPY 57bn for approximately 0.5% of the total issued shares
• Japannext Securities, a leading financial services provider operating a Proprietary Trading System (PTS), has entered into an agreement with SBI Holdings and Cboe Global Markets, a leading operator of derivatives and securities exchanges worldwide, for the transfer of shares in Japannext Securities; under the agreement, subject to regulatory approvals, SBI Holdings will transfer 14.8% of its shares in Japannext Securities to Cboe
• The Tokyo Stock Exchange’s Asia Startup Hub, which is to reveal the actual startups it is going to support by the end of September, has added primarily venture capital and corporate venture capital partners during August
• The NLI Research Institute published a report analyzing the second phase of the TOPIX reform initiated by the Japan Exchange Group (JPX); the reform aims to enhance the index’s functionality as an investment target while maintaining its representative nature of the Japanese stock market; the report summarizes the reform schedule, assesses the impact on the index composition and individual stock prices, and discusses the potential consequences of these changes
• Nomura has published its “Integrated Report 2024”
• The Bank for International Settlements published a report on “The market turbulence and carry trade unwind of August 2024”

eXponential Finance Podcast

Given the news of Helicap’s raise (see the Venture Capital section), we are pleased to release the eXponential Finance Podcast with Jitendra Singh Jaitawat, Partner & Founding CTO at Helicap, as well as Co-Founder & CEO of HELIX.

Helicap is a Singapore-based FinTech firm providing curated and exclusive private co-investments to a wide network of accredited investors. Through their institutional-grade credit analytics technology, Helicap extracts meaningful credit insights for their risk management framework. This is complemented by Helicap’s fully online and MAS licensed investor deal platform, with co-investment opportunities to their exclusive investor base.

HELIX is an institutional RWA protocol connecting on-chain investors to real-world private credit opportunities. It is the answer to the issues plaguing DeFi yields and the TradFi credit financing gap. HELIX aims to provide institutional and accredited investors access to stable yields that are uncorrelated to the broader crypto market volatility through risk managed real-world asset backed loans.

This episode is available on Apple Podcasts, YouTube, Amazon Music, and many other major platforms via our Spotify Podcaster Page.

Digital Assets

• Sony Block Solutions Labs has launched Soneium Minato, a new Ethereum layer-2 solution; in an effort to bootstrap a thriving Soneium ecosystem, Soneium Spark, an Incubation Program, will start soon; Soneium aims to become a global web3 infrastructure cornerstone, driving web3 adoption across diverse use cases and leveraging Sony Group’s touchpoints
• Pyth Network, the public decentralized data infrastructure that empowers the next generation of financial applications, and Sony Block Solution Labs announced the deployment of Pyth Price Feeds on the Soneium blockchain; Pyth is the first oracle provider to deploy price feeds to the chain, so all projects building on Soneium at launch will use Pyth Network for market data
• With Sony Block Solutions Labs being a 90/10 joint venture between Sony Network Communications and Startale Labs, and the news release not being very clear about tangible benefits for ASTR holders (and the token showing only a mild reaction), the question looms whether the “CEO” of the Astar blockchain had just been moonlighting on another project for a year or more; Jack Dorsey split his time between Twiter and Square (now Block); is Sota Watanabe splitting his time between Sony/Soneium and Astar?
• “Finschia,” the successor to LINE’s independently developed “LINE Blockchain,” and “Klaytn,” developed by Kakao’s subsidiary Ground X, have been integrated into a new blockchain called “Kaia”; with this integration, the Finschia DLT Foundation and Klaytn Foundation, which operated each blockchain, have merged to form the Kaia DLT Foundation, which will operate the post-integration blockchain “Kaia”; companies that participated in the governance of both blockchains have also been integrated into Kaia’s governance, launching with a new structure along with the Kaia mainnet
• At the ETH Tokyo conference, we captured presentations by Mercari on the Ethereum Pectra Upgrade, Techfund, and Cabinet, as well as a panel discussion on the “Web3 Creator Social Economy”

The Last Word: Poor Japan

In its “Flow of Funds” report for August 2024, the Bank of Japan included the type of chart that is used a lot when we talk about “Japan as an asset management nation”, with the focus on turning the 50% of Japanese household assets that are held in cash into more productive investments.

What gets easily overlooked in this discussion, however, is that in the US, with about 2.7 times the population of Japan, households hold just over 8 times as many assets (at a JPY/USD exchange rate of 145). Pure averages, of course, and naturally, the distribution matters. However, if you followed along, you already figured that this implies the average American household owns about three times the financial assets of a Japanese one.

If you would like to see more of our content, please head over to the Tokyo FinTech YouTube Channel or check out the eXponential Finance Podcast. Registrations for the Tokyo FinTech Meetup have moved to Luma.

We have also created two LinkedIn groups, the “Japan Startup Observer” if your interest in Japan goes beyond FinTech, and the “FinTechs of India” to capture the developments on the subcontinent. We invite you to join both these groups.

Have an awesome week ahead.