Rakuten to acquire Japanese virtual currency exchange Everybody’s Bitcoin Inc

There has been some development on the M&A front of the Japanese virtual currency industry. Rakuten Inc (TYO:4755) has earlier today unveiled its decision to acquire virtual currency exchange Everybody’s Bitcoin Inc. The deal is done via Rakuten Inc’s subsidiary, Rakuten Card Co., Ltd. The acquisition is based on a stock purchase agreement between Rakuten Card Co., Ltd. and Traders Investment, Inc. which is the parent company of Everybody’s Bitcoin.

Regarding the acquisition’s rationale, Rakuten says it expects that the role of cryptocurrency-based payments in e-commerce, offline retail and in P2P payments will grow in the future. In order to provide cryptocurrency payment methods smoothly, the company believes it is necessary to provide a cryptocurrency exchange function. Furthermore, a number of customers, in particular foreign exchange customers, of Rakuten Securities, the securities company of the Rakuten Group, have been calling for the provision of a cryptocurrency exchange service, which is also part of the background of the Rakuten Group considering entry into the cryptocurrency exchange industry.

The deal is announced about four months after the Japanese authorities issued a business improvement order against Everybody’s Bitcoin Inc. The administrative sanctions were imposed following on an on-site inspection conducted by the Japanese Financial Services Agency (FSA). The check concerned the risk management system of the company. The inspection had detected a series of non-compliance issues, including problems with keeping statutory books, insufficient provision of information to clients, AML issues, lack of control over system risks, as well as problems with internal audits.

As per the business improvement order, the company had to ensure appropriate and reliable business operations via:

• the establishment of a business management system;
• the establishment of a management system to combat money laundering and terrorism financing;
• the implementation of bookkeeping management system;
• the establishment of a management system related to user protection measures;
• the creation of a risk management system and an outsourcing management system.

Rakuten Group says it has decided to acquire Everybody’s Bitcoin shares so that it can realize the early registration as a cryptocurrency exchange and develop cryptocurrency services to customers by combining the know-how of everybody’s bitcoin as a cryptocurrency exchange, and the know-how of Rakuten Group as a provider of various financial services.

In a similar move earlier this year, online trading services provider Monex Group, Inc. (TYO:8698) acquired virtual currency exchange Coincheck, Inc, which had also received a business improvement order.