NEC and Crypto Garage Collaborate to Develop a Domestic Digital Asset Custody System

NEC Corporation (Headquarters: Minato-ku, Tokyo; hereinafter "NEC") and Crypto Garage, Inc. (Headquarters: Shibuya-ku, Tokyo; hereinafter "Crypto Garage") have announced a collaboration to develop a domestically-produced digital asset custody system (Note 1). This system is being developed for financial institutions, institutional investors, and corporations, aiming to achieve both high reliability and advanced security in anticipation of the amendment to the Financial Instruments and Exchange Act. Both companies plan to start system development within 2026, targeting a swift launch after the enforcement of the legal amendment scheduled for 2027.

■ Background

In recent years, the use of crypto assets for investment purposes has been expanding both domestically and internationally. In Japan, discussions on the institutionalization of digital assets are accelerating, driven by amendments to the Financial Instruments and Exchange Act and the development of related regulations. Consequently, interest from institutional investors and corporations in investing in crypto assets, as well as in payments and fund management using stablecoins, is growing.

With the anticipated proliferation of financial products such as Bitcoin ETFs and an increase in transaction volume through staking, financial institutions require higher quality and more reliable custody systems. However, many of the currently prevalent custody systems are provided by overseas companies, posing challenges in terms of Japanese language support, compliance with domestic laws, regulations, and business practices, and supply chain risk management. This has created a demand for a custody system developed by a Japanese company that achieves a high level of security.

■ Scope of the Collaboration

NEC, with its extensive track record in financial system development and assets and expertise in the RiskTech (Note 2) field, which uses technologies like cybersecurity and AI to proactively address risks, and Crypto Garage, with its substantial experience in the digital asset domain, will collaborate to develop a domestically-produced custody system for financial institutions, institutional investors, and corporations.

・NEC

NEC will be responsible for developing administrative business applications optimized for the workflow of financial institutions, user-friendly client applications, and building the infrastructure for the custody system. For this infrastructure, NEC will utilize its "BluStellar Modernization Program for Financial Institutions (Note 3)" to create a flexible and resilient system capable of quickly adapting to rapidly changing market conditions and regulatory updates. It also aims for seamless and secure integration with the systems of various financial institutions.

・Crypto Garage

Leveraging its expertise in corporate custody operations (safekeeping and management of crypto assets) and its track record in the crypto asset treasury domain, where companies strategically hold crypto assets, Crypto Garage will be responsible for developing and providing advanced private key management technology (wallets, signatures, etc.) and a backend compliant with AML/CFT (Anti-Money Laundering / Countering the Financing of Terrorism) regulations.

■ Future Developments

NEC and Crypto Garage plan to start system development within 2026, aiming for a swift launch after the enforcement of the legal amendment scheduled for 2027. The system will be designed with high scalability, considering the flexible management of a wide range of digital assets and future needs for the safekeeping and management of stablecoins.

Furthermore, with an eye on the standardization and dissemination of domestically-produced custody systems and wallet technologies, the companies are considering forming a consortium involving financial institutions, contributing to the development of the entire industry.

■ Comments from Both Companies

"Through this collaboration with Crypto Garage, which has deep expertise in the treasury domain, NEC aims to realize a highly reliable custody system that matches Japanese business practices, enabling financial institutions to utilize a domestically-produced system. NEC will support financial institutions in launching new businesses, with this custody system concept at its core, and contribute to the social implementation of Japan's token economy."

Kazuhisa Shimizu, Corporate SVP and Head of Financial Solutions Business Unit, NEC

"Crypto Garage will leverage the knowledge gained from providing custody services that support corporations' use of digital assets, and through this collaboration with NEC, we will elevate our technology to a custody service of financial institution standards. We aim to create a future where digital assets are used safely in a wider range of business scenarios, together with NEC."

Justin Dhingra, Executive Officer, CBO & COO, Crypto Garage

Under its value creation model "BluStellar (Note 4)," NEC provides end-to-end services, including BluStellar Scenario, which guides clients from strategic consulting to implementation across the three axes of business model, technology, and organization/human resources, as well as various offerings. By transforming business models with cross-industry advanced insights and cutting-edge technology, NEC helps solve social issues and clients' management challenges.

Crypto Garage will continue to support financial institutions in utilizing digital assets in an integrated manner, leveraging the custody technology and expertise accumulated through the provision of its corporate digital asset financial service "SETTLENET." By developing and providing advanced financial services that make full use of blockchain and cryptographic technologies, Crypto Garage will create and implement next-generation architectures and contribute to the development of a sustainable society.

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(Note 1) A digital asset custody system is a system infrastructure for custodians (financial institutions that store and manage digital assets on behalf of investors) to safekeep and manage assets in their custody. It handles secure deposit/withdrawal instructions and balance management.

(Note 2) A term coined by NEC combining "Risk" and "Technology." It refers to solutions that visualize, optimize, and proactively address risks faced by clients using advanced technologies such as AI, aiming to deal with increasingly complex financial risks.

(Note 3) The "BluStellar Modernization Program for Financial Institutions" is a program that supports the continuous advancement and resilience enhancement of financial institutions' operations and systems. It provides a flexible architecture and scalability to respond quickly to environmental changes, supporting the sustainable growth and achievement of management strategies for financial institutions.

https://jpn.nec.com/fintech/index.html

(Note 4) "BluStellar" is a value creation model that realizes business model transformation by leveraging NEC's cross-industry advanced insights backed by proven results and its cutting-edge technologies honed through years of development and operation. It guides clients to the future by solving social issues and their management challenges.

https://jpn.nec.com/dx/index.html

Company Overview

NEC Corporation

Established: July 1899; Representative: Representative Director, Executive Vice President and CEO, Takayuki Morita

NEC is a global technology company with over 125 years of history, leveraging strengths in AI, cybersecurity, and communications technologies. It operates an IT services business that promotes AI transformation in society and industry, and a social infrastructure business that contributes to the security of Japan and the world.