DMM and GMO also Withdraw their Crypto Mining Businesses. The reason SBI Still Spends a Huge Amount
Due to the sluggish price of crypto assets, many companies conducting related businesses were obliged to withdraw. Under this harsh situation, SBI revealed a policy to further strengthen their mining business. In this article, I would like to review and explain why SBI is still hugely investing in mining business amongst adversity.
Domestic and overseas companies that are facing harsh conditions
In December 2018, it became clear that the U.S. blockchain consulting company “ConsenSys” laid off 60% of all employees. The deterioration in business conditions was caused by the decline in the price of crypto assets. As the company was the driving force behind the crypto asset market, the news on this massive layoff was a major headline at the time.
As it is overseas, Japan is also in a difficult situation. DMM has announced the closure of its mining farm which was set up in Kanazawa City, Ishikawa Prefecture. In addition, GMO, which also had a mining business, posted an extraordinary loss of 35.3 billion Yen, and announced that it will withdraw completely from mining and sales of mining equipment.
“DMM also withdrew from Kanazawa’s virtual currency mining business”
“GMO posts extraordinary loss due to deterioration in profitability of virtual currency mining business”
SBI President Kitao sends bullish signal that “Changing the holding structure of Bitcoin”
On the other hand, SBI sees such adversity as opportunity and aims to recover its mining share in Bitcoin. President Yoshitaka Kitao, president of SBI Holdings, said in a third-quarter earnings briefing held on January 31, 2019,
“When I entered the world of cryptocurrency, when I look at the holding structure of Bitcoin, the Chinese have overwhelmingly such a funny thing, it is unlikely to repeat the fork with ego and greed. I am taking 30% of us and changing the world, I think that timing may be approaching.”
Actually, this current situation has not changed yet. Most of the Bitcoin mining share is focused on Chinese mining companies that have been doing business way ahead of time. However, there are rumors that Bit Main, which is particularly powerful among them, has recently been having serious management complications.
Bit Main represents mining companies “BTC.com” and “AntPool,” which are subsidiaries. According to BLOCKCHAIN data famous for information distribution and research related to cryptic assets, the mining share totaling two companies was about 32.2% in September 2018, but as of February 2019 was about 27.3%, dropping in mining share.
In addition, there are many materials that lead to management deterioration such as mass layoffs of the Bitcoin cache development team held by the company, and large investments by CEO Jihan Wu in Bitcoin Cash (BCHABC). President Kitao seems to be trying to recover mining share of Bitcoin by seeing this as an opportunity to take advantage of this crisis by from these rival companies.
Shunpei Morita, who is the CFO at the company’s accounts briefing, will clarify the policy of increasing the number of mining machines currently running thousands of units in the future. Not only does President Kitao see this, but we can see that unification of consciousness is being carried out with strengthening of mining throughout the entire company being evident.
Why does SBI focus on mining?
Looking at the market capitalization ranking of crypto assets as of February 2019, I notice a major change since a year ago. There are only three crypto assets exceeding 1 trillion Yen which are Bitcoin, Ripple, and Ethereum, with 4th place and below being less than 300 billion Yen. The speculation boom is over, and projects without content are being culled out. This trend will only grow stronger in the future.
So, what will be the future for Bitcoin? Twitter CEO Jacques Dorsey said in an interview with British information media The Times in March 2018, “Bitcoin will be the only currency in the world, probably in ten years or more. It will be realized in a short time.” It is doubtful whether the views of one person are correct, but there are already indications that it is becoming a common value around the world. In fact, in Venezuela the local currency is suffering from hyperinflation, while transaction volume of Bitcoin is at a record high. Rather than what the country deems the people’s currency with value (Venezuelan Bolívar), the people have chosen Bitcoin as the real currency of value.
When Bitcoin becomes common value in the world, the benefit obtained by having that share is immeasurable. Even if we pay a large amount of money at this moment, investing in the mining business can connect to our own business that will generate enormous profits in the future. That’s where the aim of SBI to strengthen mining lies.
SBI’s current status and future prospects
SBI also handles “SBI Ripple Asia,” which is responsible for Ripple’s Asian business and is currently the second largest cryptocurrency by market capitalization. Ripple is issued for international payments between banks and the affiliated companies of the network that it offers services to, including well-known domestic and overseas companies, is already over 200 companies. At the moment, it is one of the largest and most steadily progressing projects among all cryptocurrencies.
SBI has released a payment application using Ripple technology, “Money Tap” in October 2018 and has already succeeded in commercialization in Japan as well. Currently only 3 banks including Shinkin SBI Net Bank, Suruga Bank, and Resona Bank are compatible. Plans are for 61 banks to participate in the consortium of domestic and overseas exchange consolidation where the participants will serve as secretariats in the future responding sequentially.
In addition, they are also actively engaged in crypto asset-related projects in Japan, particularly through the establishment of a joint venture with the U.S. blockchain company R3 and investment in start-ups that develop wallets. President Kitao said that he would like to propose “S coin”, a self-developed settlement currency that has started the verification experiment, as a regional currency of the Expo in Osaka in 2025. In Japan, there is no cryptographic asset yet to be distributed for settlement. “S coin” not only aims at the domestic market, but wants to spread on a global level, giving a strong impression of the enthusiasm for president Kitao’s crypto asset business.
In the future, SBI will further increase its presence as the central entity of the crypto asset market in Japan and Asia. Given that tradeoff, the mining costs they pay at the moment may only be a minor price to pay.