Bitcoin exchange Bitflyer raises US$1.6M; aims to fill Mt Gox void
A former Goldman Sachs trader, Yuzo Kano of Japanese Bitcoin firm Bitflyer, has raised US$1.6 million and aims to fill the Mt Gox voidBy Shiwen Yap 24 Jul, 2014
Yuzo Kano, Founder of Bitflyer, has announced the seed funding of US$1.6 million, designed to power a new Bitcoin exchange called BitFlyer. The new Japan-based Bitcoin exchange has ambitious goals, aiming to capture the market position formerly occupied by the now defunct Mt Gox exchange, once the largest Bitcoin exchange.
Founded in 2010, by 2013 Mt Gox was handling about 70 per cent of all Bitcoin transactions. In December 2013, Bitcoin prices had climbed to a record US$1,151. Three months later, Bitcoins were worth half this, when US$480 million were stolen from Tokyo-based Mt Gox, bankrupting it and resulting in its shutdown, with liquidation beginning in April 2014.
Yuzo Kano, the founder of the new venture is a former derivatives and convertible bonds trader with Goldman Sachs. He resigned from his position with Goldman Sachs in December 2013. His interest in BitFlyer developed due to the benefits he perceives in Bitcoin markets, as well as an interest in how complex systems function.
BitFlyer’s advantage seems to lie in its Kanos intention to operate as a counterparty for buyers and sellers, explaining that it will allow BitFlyer to streamline how transactions are finalised and eliminate complexity from price-setting mechanisms. This is is designed to make it easier for consumer to buy Bitcoin, but also increases the risks that BitFlyer takes on. While looking at the collapse of Mt Gox, as “one less competitor,” Kano feels that the fall of the former Bitcoin exchange has “left many Japanese with a very negative impression of Bitcoin.
BitFlyer isn’t alone capitalising upon the growth of the Japanese market. Earlier in July, China-based, Bitcoin ATM manufacturer, BitOcean, partnered with New York, US-based exchange technology provider Atlas ATS, with plans to launch an exchange targeting Asia. The two firms jointly bid for the assets of Mt Gox, with plans to start a Bitcoin platform in Japan by August.
Kano, Japan and beyond
Kano joined Goldman Sachs in 2001 upon graduating from Tokyo University with a master’s degree in fluid dynamics, a branch of physics studying the movement of liquids and gases. This background in complex systems and programming led to three and a half years working as analyst for Goldman Sachs, before he left to join BNP Paribas SA. Here, he traded for several years before returning to Goldman Sachs for another stint.
Asked why he founded Bitflyer, Kano stated, “There is no stability in working for Goldman and doing something on my own has a greater upside. I like complex systems, that’s why I became a derivatives trader. Now it’s Bitcoin.”
This professional background underlies Bitflyer, which allows anyone with a Japanese bank account to trade Bitcoins. Their trading serving launched in April 2014, eschewing trading options used by competing exchanges in favour of a simple interface meant to appeal to novice users. Though neither as large nor influential, a Bitcoin market as China, risk-averse Japanese consumers and government officials are beginning to express interest.
While Kano has raised seed funding, he is now seeking funds from overseas investors too, so that Bitflyer can expand beyond Japan by 2015. Commenting on the need for industry regulations, security standards and identification guidelines, Kano said, “If we have another fiasco like Mt Gox, it’s game over. There needs to be monitoring to prevent that from happening.”