Update (Sept. 12, 7:58 am UTC): This article has been updated with comments from an SBI Holdings representative.

Zodia Custody, the digital asset custody firm backed by Standard Chartered, has dissolved its joint venture with Japan’s SBI Holdings two years after launching the initiative.

The venture, known as SBI Zodia Custody, was 51% owned by SBI and 49% by Zodia Custody. According to its website, the project aimed to replicate institutional-grade custodial services in the digital asset space.

A representative from SBI Holdings confirmed to Cointelegraph that the decision has been made to dissolve the company. ”We view this as a forward-thinking and proactive step, designed to accelerate and thoroughly pursue group-wide synergies within our digital space ecosystem,” they added.

Julian Sawyer, CEO at Zodia Custody, reportedly told Bloomberg, “This is a strategic alignment between SBI and ourselves as a mutual decision that we have other priorities and they have other priorities.”

Sawyer revealed that the venture had been in discussions with Japan’s Financial Services Agency (FSA) regarding local registration but had not submitted a formal application. They were “working and preparing for an application,” he said, noting the decision to dissolve came before any regulatory filing was made.

The failed SBI Zodia Custody project. Source: SBI Zodia Custody website

Related: From 55% to 20%? How Japan plans to fix its crypto tax rules

SBI says Zodia exit not a retreat

SBI Holdings spokesperson Kosuke Kitamura told Bloomberg that the exit should not be seen as a step back. The SBI representative told Cointelegraph that the company is already exploring a new framework for its custody services in Shinsei Trust & Banking and SBI Clearing Trust.

Last month, it was reported that SBI Holdings plans to launch Japan’s first dual-asset cryptocurrency exchange-traded fund (ETF), offering exposure to both Bitcoin (BTC) and XRP (XRP). However, the firm later denied those reports.

Zodia Custody, meanwhile, continues expanding in other markets. The firm recently acquired Tungsten Custody Solutions in the UAE amid a shift in focus to more favorable regulatory environments.

Related: Japan regulator proposes crypto rule overhaul in line with securities law

Japan remains a tough market for crypto

Japan remains a tough market for foreign crypto firms due to its cautious regulatory approach.

In July, Maksym Sakharov, co-founder and CEO of decentralized onchain bank WeFi, told Cointelegraph that Japan’s regulatory bottlenecks, not taxes, are the real reason crypto innovation is leaving the country.

Sakharov said that even if the proposed 20% flat tax on crypto gains is implemented, Japan’s “slow, prescriptive, and risk‑averse” approval culture will continue to push startups and liquidity offshore.

“The 55% progressive tax is painful and very visible, but it’s not the core blocker anymore,” he said. “The FSA/JVCEA pre‑approval model and the absence of a truly dynamic sandbox are what keep builders and liquidity offshore,” he added.

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