TOKYO -- The purchase of troubled cryptocurrency exchange Coincheck is a key part of Monex Group's mission to redefine finance, the president of the pioneering company told Nikkei in an interview.
After hackers stole more than $500 million of the virtual currency NEM from Coincheck in January, it sought outside backing and found a partner in Monex. Since founding the online brokerage in 1999, President Oki Matsumoto has been at the forefront of changes in the financial sector.
Matsumoto sat down with Nikkei to discuss his ambitions for the Coincheck acquisition, and the future of finance.
Q: The real value of virtual currencies is far from certain. Some people view the phenomenon as a bubble, or predict a regulatory crackdown. Why did you decide to buy Coincheck under these circumstances?
A: Japan's Financial Services Agency is one of world's most forward-thinking regulators where virtual currencies are concerned. Opinions on cryptocurrencies themselves have so far have been mixed. Some people believe they have a future, while others are more skeptical.
But there is no doubt that the blockchain technology underpinning these currencies will find use in a variety of settings -- mediating financial transactions or managing information, for example. Its strength is that it can manage complex contracts with very different terms under a single system. As someone in the financial sector, I want to serve as a catalyst for efforts such as these.
Central banks around the world have begun working toward national digital currencies -- sovereign currencies made digital. Japan hasn't joined the tide just yet, but personally, I believe these efforts will eventually take off in a major way.
Acquiring Coincheck is meaningful for the Monex Group in that it brings us closer to the possibilities that blockchain technology and virtual currencies hold. Cryptocurrency exchanges hold much of the technology, knowledge and expertise in the field.
Q: What do you think of the risks associated with taking over Coincheck -- for example, the risk of lawsuits stemming from the exchange's costly security breach?
A: While I can't say there is no risk associated with the deal, we've managed to mitigate it to a large degree. In addition to the 3.6 billion yen ($33.4 million) purchase price, the acquisition agreement includes an earnout clause that will pay an additional sum based on how Coincheck performs. This only seems completely natural to me, though it seems society wasn't quite used to the idea.
What we need to be most careful of is avoiding another scandalous incident like the one in January. We need to ensure our security is tight. I realize there is a lot to be done.
Q: Some institutional investors overseas seem to be skeptical of [Monex] handling virtual currencies.
A: There is indeed speculation that buying Coincheck could hurt the Monex Group, given that many of our shareholders are foreign institutional investors. Someone even said that certain institutions have rules against holding stakes in companies dealing in virtual currencies. But that's not the case.
I personally explained the acquisition to our major foreign institutional investors. I'm far more knowledgeable about these matters than others are, as I meet with those officials frequently.
When I returned as president of our securities unit Monex last October, I announced that we would make virtual currencies and blockchain core components of our business. At first, I intended to set up those operations myself. But then the [Coincheck] acquisition came along in March -- what luck!
Q: What role will virtual currencies play in Monex's business? The company is already a pioneer in the online brokerage field.
A: Ever since I founded Monex in 1999, I've been presenting society with new forms of finance. When online brokerages emerged 20 years ago, the internet wasn't particularly widespread, and the necessary technical knowledge was not widely available. I remember setting the rules for trading, simultaneously studying the technical side and negotiating with regulators and government ministries.
Virtual currencies are the same: While our engineers have a wealth of technical knowledge, they know little about how to work the technology into society or create a framework of rules and laws. Someone needs to act as an interpreter between regulators and technical experts for the technology to advance. I want to play that role for virtual currencies.
The entire cryptocurrency market is worth 50 trillion yen, or 5% of the gold market's value. You can no longer ignore virtual currencies as assets -- they're too big to look past, and have begun to affect existing financial markets. Our acquisition of Coincheck is an essential piece of our mission to redefine what finance means.
Interviewed by Nikkei Business Editor in chief Masaki Higashi and Staff writer Yasue Takeda