Complex Risks Related to Crypto-Asset Exchange Registration, Price Volatility and Systems

「Based on the fair value of the crypto-assets held as of 31 March 2026, the Company recorded a crypto-asset valuation loss of ¥5,893 million, presented as a decrease in revenue.」

「Although the Group has withdrawn from the financial-related business, namely the crypto-asset exchange business, it continues to hold investments in crypto-asset-related businesses, investments in crypto-assets and other business investments made by that business. If the prices of these investments decline due to market changes or other factors, or if they fail to generate the expected cash flows, they may adversely affect the Group's financial results and financial position.」

「During the first quarter of the current consolidated cumulative period, crypto-asset prices fell substantially across the market, as exemplified by the price of bitcoin falling from ¥5.73 million at the beginning of April to ¥2.64 million at the end of June.」

「The financial-related business involves market-related risks due to its nature, including the risk of incurring losses as the value of assets held fluctuates in response to changes in market risk factors such as crypto-asset prices and foreign exchange rates, and the risk of incurring losses because market turmoil or other factors may make trading impossible or force the Company to trade on significantly less favorable terms than usual. It also involves credit risk, system risk and operational risk, among others.」

「The unauthorized outflow required the Company to record substantial extraordinary losses for procuring crypto-assets (cryptocurrency) relating to customer deposits, recovery measures, and measures to prevent recurrence,」

「The unauthorized outflow of cryptocurrency resulted in costs to procure cryptocurrency to cover customer deposits, losses on cryptocurrency held by BPJ for its own account, costs of responding to overseas cryptocurrency exchanges, and costs related to the initial response and measures to prevent recurrence. In addition, following a review of the use of software and other assets, the Company recorded losses on the disposal of fixed assets, impairment losses due to a decline in the profitability of fixed assets, and valuation losses on shares in an affiliate held by BPJ. As a result, including the amounts recorded in the second quarter, the Company recorded extraordinary losses of ¥3,928 million.」

「The unauthorized outflow of cryptocurrency resulted in costs to procure cryptocurrency to cover customer deposits, losses on cryptocurrency held by BPJ for its own account, costs of responding to overseas cryptocurrency exchanges, and costs related to the initial response and measures to prevent recurrence. In addition, following a review of the use of software and other assets, the Company recorded losses on the disposal of fixed assets, impairment losses due to a decline in the profitability of fixed assets, and valuation losses on shares in an affiliate held by BPJ. As a result, including the amounts recorded in the first quarter, the Company recorded extraordinary losses of ¥3,690 million.」

「On 11 July 2019, an unauthorized outflow of cryptocurrency occurred at the cryptocurrency exchange operated by the Company's consolidated subsidiary, 株式会社ビットポイントジャパン (hereinafter, "BPJ"). In this incident, approximately ¥3,028 million worth of the cryptocurrency held in hot wallets, consisting of cryptocurrency deposited by customers and cryptocurrency held by BPJ for its own account, was illicitly transferred out. The conversion rate was based on BPJ's daily published rate at 16:00 on 11 July 2019, the date of the incident.」

「The cryptocurrency market was active through the end of 2017, but following, among other factors, the discovery in January 2018 of an unauthorized outflow of cryptocurrency from a deemed cryptocurrency exchange service provider, the overheated market reversed. The market remained subdued throughout 2018, while volatility continued to be high, including sharp falls in bitcoin prices from January to March and in November.」

「The cryptocurrency market was revitalized by various legislative developments and reached a peak in December 2017. However, following the discovery in January 2018 of an unauthorized outflow of cryptocurrency from a deemed cryptocurrency exchange service provider, the overheated market returned to a more stable condition. Nevertheless, volatility remained high, including a sharp fall in bitcoin prices in November 2018.」

「During the previous year, the cryptocurrency trading market was revitalized by various legislative developments and reached a peak in December 2017. However, following the discovery in January 2018 of an unauthorized outflow of cryptocurrency from a deemed cryptocurrency exchange service provider, the market, which had temporarily overheated, returned to a more stable condition.」

「During the previous year, the cryptocurrency trading market was revitalized by various legislative developments and reached a peak in December 2017. However, following the discovery in January 2018 of an unauthorized outflow of cryptocurrency from a deemed cryptocurrency exchange service provider, the market, which had temporarily overheated, returned to a more stable condition.」

「On the other hand, the year was marked by significant headwinds. On 26 January 2018, an unauthorized outflow of cryptocurrency from a deemed cryptocurrency exchange service provider came to light, increasing concerns about certain cryptocurrency exchange service providers, while the banking and advertising industries became more cautious about doing business with them.」

「The participation of Japanese investors in the cryptocurrency trading market rose sharply following the enforcement on 1 April 2017 of the amended Payment Services Act and other cryptocurrency-related laws and regulations, and the exemption from consumption tax on cryptocurrency transfers from 1 July of that year following the amendment of the Order for Enforcement of the Consumption Tax Act, among other developments. As demand increased, cryptocurrency prices surged. In particular, in December 2017, the price of bitcoin surged to more than ¥2 million, 20 times the year-earlier level, and interest in Japan rose sharply.」

「On the other hand, factors contributing to market turmoil emerged, including sharp movements in trading prices caused by the 1 August bitcoin fork and other events, and regulations on cryptocurrency trading in China.」

「On the other hand, temporary concerns about the creditworthiness of cryptocurrencies spread, with the bitcoin fork issue on 1 August being reported daily.」

「In addition to front-loaded initial investment in infrastructure, including the trading system, and in strengthening the management framework for applying to register as a cryptocurrency exchange service provider, the segment recorded trading losses arising from a sharp fall in bitcoin prices following the bitcoin hard-fork issue as a reduction in revenue. As a result, segment revenue was ¥0 million and segment loss (operating loss) was ¥187 million. In the financial-related business, failure to obtain registration as a cryptocurrency exchange service provider or a sharp change in cryptocurrency prices may have a material effect on the Group's financial results.」