SBI Holdings, the investment arm of Japanese financial giant SBI Group, has canceled a business partnership with Chinese cryptocurrency startup Huobi Group.

In an announcement released Friday, SBI Holdings said it has decided to halt the business collaboration with Huobi for the launch two cryptocurrency exchanges in Japan.

As reported by CoinDesk, the two firms first struck the deal in December 2017 to combine efforts for the new Huobi Japan and SBI Virtual Currency exchanges.

The latter exchange had already completed business registration with Japan's regulator, the Financial Services Agency (FSA), in September 2017. Huobi Group had indicated that the platforms were expected to begin operations this month.

Yet, in the latest announcement, SBI Holdings said it has scrapped its original plan to use Huobi's technology, know-how and human resources in operating the exchanges, and instead has decided to bring the efforts in-house.

In explaining the reasons for canceling the deal, SBI Holdings said the firm needs a system that incorporates higher levels of security and which can respond promptly to domestic and overseas regulations.

As such, according to the statement, SBI Holdings will now utilize SBI Group's own resources to build a system with enhanced security and sufficient processing capacity.

The decision comes at a time when the FSA is beefing up its efforts in scrutinizing Japanese exchanges regarding security measures, following the hack of some $530 million-worth of the NEM cryptocurrency from the Coincheck exchange in January.

Just last week, the FSA issued administrative penalties to several domestic platforms deemed reckless by the agency, having allegedly provided insufficient security measures to fully protect investors.

The news also follows a Feb. 28 announcement by SBI, saying it had postponed the live launch of SBI Virtual Currency citing the need for further security enhancements.

At press time, Huobi Group had not responded to CoinDesk's inquiries for comments on its plan to further pursue the Huobi Japan effort.

Editor's note: Some of the statements have been translated from Japanese. 

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