The already crowded American market for cryptocurrency exchanges is about to get a new entrant.
Japanese exchange bitFlyer, the largest bitcoin startup in its home country, announced Friday that it plans to expand to the United States by opening a San Francisco-based exchange in the fall of 2017. San Francisco is where Kraken and Coinbase's GDAX, two leading U.S. digital asset exchanges, are located.
Given the dramatic increase in the prices of bitcoin, ether and many other blockchain assets—the total market value has climbed to more than $142 billion, from a mere $18 billion on January 1—it makes sense that some exchanges are looking to expand into new markets.
The company lined up a banking partner in the U.S. a year ago, a spokesman said, declining to identify the institution. Getting and keeping a bank account was once one of the biggest challenges for crypto exchanges; financial institutions saw too much reputational and regulatory risk in having anything to do with a leaderless, bordlerless internet currency.
Strict compliance with know-your-customer and other anti-money-laundering requirements is a must for any exchange to get and stay banked.
“We use a tiered approach to our KYC, meaning as a customer desires to execute larger transactions, additional information must be provided,” said Bartek Ringwelski, the chief operating officer of bitFlyer USA.
Although bitFlyer is headquartered in Japan, CEO Yuzo Kano said in a news release that his vision "was always to create a global company, and I am excited that the U.S. will be its first step toward global expansion. Bitcoin is a global currency, [and] now our exchange will be global too."
The initial version of the U.S. platform is designed to appeal primarily to experienced traders and institutions by allowing more complex orders such as limit, market, stop and stop-limit orders, according to a bitFlyer spokesman. But it will be open to retail investors as well, provided they live in one of the 34 states where bitFlyer is approved to do business.
New York, whose regulatory regime for digital-currency businesses is the most stringent in the U.S., is one of the states whose residents bitFlyer is not yet allowed to serve.
There is another limitation of bitFlyer USA, as the new operation is known. While the Japanese exchange supports trading in multiple cryptocurrencies—including Bitcoin Cash, a new digital coin that resulted from a "fork" of the original in early August—the American platform will be limited at launch to simple bitcoin-to-dollar and dollar-to-bitcoin trades.
But bitFlyer intends to add support for other assets, and continue to pursue expansion into the remaining U.S. states, after launch, according to the release.
"There is a concept of 'Mrs. Watanabe' in the Japanese forex market; she is the personification of household trading in Japan," said bitFlyer's chief operating officer, Bartek Ringwelski. "[And] bitFlyer aims to be the first exchange to allow U.S. bitcoin traders to trade with Mrs. Watanabe."