San Francisco-based bitcoin and digital asset exchange Coinbase recently announced a strategic partnership with Japan’s largest commercial bank, the Bank of Tokyo-Mitsubishi UFJ (BTMU), to “support Coinbase's long-term international expansion efforts.”
Japan has been a rapidly growing market for bitcoin this year, with Tokyo-based bitcoin exchange BitFlyer skyrocketing up to the number three exchange by volume, and both Quoine and BTCBOX regularly reaching the top ten. Competitors Coincheck and Zaif also have some steady daily Yen volume too. Global Yen trades now surpass Euro and U.S. Dollar trades.
Coinbase hasn’t had any presence in Japan so far, but with such a qucikly growing market passing them by, Coinbase has made a deal to raise US$10.5 million from investors including BTMU in a Series D fundraising round. This brings the the San Francisco-based multipurpose bitcoin services provider's total funding up to US$116.5 million to date from a large number of investors.
“BTMU will be a strong partner for us both in Asia and globally,” said Sam Rosenblum, the international expansion and banking lead at Coinbase, during an interview with Reuters. “Japan will certainly be an important market for us and one that is pretty critical for the development of digital currencies.”
Established in April 2001, Mitsubishi UFJ Financial Group (MUFG) has total assets of ¥298 trillion, or about US$2.8 trillion, as of March 2016. The Group was ranked by Accuity's 2016 Bankers Almanac as Japan's largest retail bank by assets.
Last month, MUFG reportedly was working on a project to create its own digital currency called MUFG Coin using blockchain technology. The Group had previously been exploring the use of blockchain technology by partnering with private blockchain startup, Chain Inc., with the aim "to build blockchain solutions for Japan’s financial sector," according to Chain's blog.
BTMU is the banking subsidiary of MUFG, and is the largest bank in the country with offices throughout Japan and in 40 other countries. For the financial year ended March 31, 2016, the MUFG reported profits of ¥951.4 billion, 61.59 percent or ¥586.0 billion of which was BTMU's profits. MUCAP, also a subsidiary of MUFG, is one of Japan's largest venture capital firms.
BTMU will reportedly invest several hundred million yen in Coinbase, making it the first Japanese bank to hold a stake in a digital currency exchange. However, MUCAP became a major investor in the $27 million series C round for BitFlyer in April.
MUCAP also took part in Coinbase’s funding round with BTMU, along with other strategic investors; a venture capital firm specializing in startups, Sozo Ventures, the New York Stock Exchange and BBVA. BBVA is Spain's second largest retail bank after Banco Santander by asset, according to Accuity's 2016 Bankers Almanac.
The current 4 million reported Coinbase customers are based in the U.S. and Europe. Partnering with BTMU, Japan's largest commercial bank with 40 million accounts, should allow Coinbase to pursue a major market in Asia for the first time.
“While we do not yet offer digital currency exchange services in Japan, we are committed to continued international expansion and look forward to working with BTMU to support this focus in key markets in Asia and globally.”
Coinbase is not the first major bitcoin company to partner with a giant retail bank. Circle partnered with Barclays in April, allowing the bank's customers to quickly access Circle accounts, send the British pound back and forth very cheaply, and purchase bitcoin within the app.
However, Coinbase has been busy expanding their reach. The company announced a few interesting upgrades on Wednesday, aimed at giving their 43,000+ merchants better tools to use in their businesses.
The ability to offer partial refunds, an overpayment flag, a mispayment buffer, and the integration of a new block explorer all are welcome additions to those who do serious retail business.
Not all news at Coinbase is rosy though. Along with the news of its partnership with BTMU, Coinbase just announced that they are being forced to pull out of a smaller market, Canada. The company sent emails to customers across Canada on Thursday, informing them that it can no longer support service there.
“As of August 1, Coinbase’s Canadian payments provider, Vogogo, will be shutting down its payment processing business,” their announcement read. “When this occurs, Coinbase will no longer be able to support Canadian EFT transfers, Interac transfers, or the storage of customer CAD on Coinbase.”
They called for all customers to remove their Canadian dollars stored on Coinbase by July 29th, either by withdrawal to a linked bank account or by converting to bitcoin. Fees will be applied to suspended accounts that don’t comply.
“We are disappointed to lose the ability to offer these payment methods for our Canadian customers and hope to provide additional payment methods in the future. We appreciate your support during this change.”
Vogogo has been struggling to stay afloat in the cryptocurrency space for quite some time, despite experimenting with several business models, and Coinbase is not the only company in the cryptocurrency space using Vogogo for payment processing. Kraken also uses the service, and have yet to release a statement regarding the subject.