Japan’s SBI Holdings Ventures into Mining Manufacturing The Japanese financial conglomerate SBI Holdings has recently announced the creation of a new subsidiary company: SBI Mining Chip Co. The company will produce mining gear which will enable SBI Holdings to mine cryptocurrency without having to buy ASICs from large companies like Bitmain. The Announcement SBI Holdings publicized the creation of the new company in a short notice posted on their website. “SBI Holdings, Inc., hereby announces that the Company has established SBI Mining Chip Co., Ltd., which engage in manufacturing of mining chips and development of mining systems, as a part of the Company’s strategy on digital asset related businesses.” What they failed to announce however was which cryptocurrencies they planned to develop mining gear for. An ASIC used to mine Bitcoin or Bitcoin Cash cannot, for example, be used to mine ZCash. Because of that, an investment into the production of mining gear for a certain coin is also a bet on that coin’s continued success. Thus the coin or coins that SBI chooses to produce miners for will give us a clue to which cryptocurrencies they believe have the highest chance of succeeding in the long term. Previous Experience with Mining In 2018 SBI announced that they had created a subsidiary company, SBI Crypto, to mine Bitcoin Cash. That operation however did not last long and by October of the same year they were no longer mining. Interestingly during the brief stint when SBI was mining BCH it did so internationally. “The Group has practiced its cryptocurrency mining business at overseas and has now decided to expand its business scope to the manufacturing of mining chip itself.” It may have mined overseas for regulatory reasons or because electricity in Japan is too expensive. The reason is unclear. It will be interesting to see once the first batch of miners are ready, whether SBI again chooses to mine overseas or whether it elects this time to mine in-country. Bucking the Trend While SBI Holdings is renowned for its advocacy of cryptocurrency, it’s still surprising to see a financial firm invest so heavily into cryptocurrency. Financial firms tend to be conservative late adopters but SBI is proving to be just the opposite. Also surprising is that SBI has decided to produce mining gear when they’re outspoken advocates of Ripple’s XRP. XRP uses a BFT (Byzantine Fault Tolerant) consensus mechanism which does not rely on miners for security and it won’t be affected by any moves SBI makes in the mining sector. How it’s Going to Happen SBI has stated that, “the development and manufacturing will be conducted together with a relationship between a large semiconductor enterprise in the U.S.” It’s interesting that they would choose to work with an American company when there are Japanese, Chinse and Taiwanese semiconductor companies with exceptional products. While we cannot know for certain which company they will be working with, the most likely guess would be Intel as they have previously shown interest in Bitcoin mining hardware developments. Pending further announcements it’s unclear how long it will take SBI to begin the manufacturing of miners. Adam Traidman, the head of operations, has a resume which includes working at NASA and twenty years of entrepreneurship. And while he is undoubtedly qualified for the job, producing an efficient miner that will be profitable in the rapidly changing world of crypto is going to be a challenge. It will be interesting to see how the project turns out and whether SBI is more successful at producing miners than it was at mining Bitcoin Cash. The Bullish Case The announcement from SBI came a week before the recent price spike, when market sentiment was negative and there was a consistent call for even lower lows. Despite this SBI still decided to invest in the production of mining gear. If they believe that they can be profitable during the depths of a bear market, or at least break even, they must be expecting large profits when the next bull market occurs.