In a surprise move, Sony Group has announced its entry into the cryptocurrency trading business. Most people associate Sony with flatscreen TVs, gaming consoles, movies, and music. Few automatically link the entertainment behemoth with DeFi or blockchain exchanges, which begs the question as to why make such an abrupt pivot and its potential impact on the crypto sector.

According to media reports, the Japanese company plans to overhaul the "Whalefin" exchange it acquired through its subsidiary S.BLOX, formerly known as Amber Group. The update will include redesigning the exchange dashboard, launching a new app, and adding more crypto assets to its trading roster. But what's driving this action – is it a play for potential profits or a push toward innovative tech to stay ahead of competitors?

Localized launch not a strategic threat to global exchanges - yet

"Based on what’s been disclosed publicly, Sony is likely to launch a Japanese futures exchange, which will not be in obvious competition with the global crypto exchanges for the time being. Its direct competitors may be strong Japanese local exchanges such as Bitbank, Bitflyer, and Coincheck,” Ryan Lee, Chief Analyst at Bitget Research.

This localized approach suggests Sony is taking baby steps into the crypto space, possibly to learn to walk before it runs, through a more global expansion. However, the impact of Sony's entry extends beyond early market competitors and its future aspirations.

"The greater significance of this matter currently comes from the news. The narrative of 'traditional giant companies preparing to enter Web3 for exploration' can make the market believe that Web3 is on the road to vigorous development," said Lee.

Big brands are in crypto but few are tech players

This particular insight highlights how Sony's move could be an innovative push that also serves as a cash catalyst for the company – as well as for broader adoption and interest in cryptocurrency and blockchain technology. The reason for that is the significant brand recognition and “halo effect” that Sony brings to the crypto ecosystem.

Obviously Sony is not the first big brand to highstep its way into Web3. We've seen similar moves from companies like JPMorgan, Facebook (now Meta), Adidas, and Starbucks - to name a few. These household names bring legitimacy and attention to the crypto space, potentially driving adoption among consumers who might have been a bit iffy about the whole digital asset thing to begin with.

However, it's worth noting differences between these Web2 players and crypto-native companies like Coinbase and Crypto.com. While the latter have built their entire business models around crypto and blockchain tech – while trying to push into the mainstream – companies like Sony seem to be diversifying into the crypto sphere as an extension of existing operations.

Unique challenges await non-crypto-native companies

The distinction between those different operational models of Sony and crypto-natives is critically important because it gets to the companies’ core values regarding commitment and adaptability when entering new markets. Crypto-companies have weathered the volatile markets and regulatory uncertainties that come with Web3. Conversely, traditional companies entering the space may face a steeper learning curve and potential cultural clashes as they adapt to the fast-paced, decentralized nature of the crypto world.

Lee believes that Sony's approach to entering the crypto space seems to be more strategic and long-term oriented than a simple cash grab. "Sony Group is actively deploying Web3 fields such as cryptocurrency exchanges and NFT platforms through acquisitions and joint ventures. This business expansion is not abrupt." This measured approach suggests that Sony is not merely chasing profits but is making a calculated entry into a technology it believes will be significant in the future.

The company's broader Web3 strategy, which includes initiatives in gaming, music, and entertainment, indicates that Sony sees potential applications for blockchain technology across its diverse business portfolio.

Sony may be well-positioned to thrive in web3

While technology might be a driving factor, the potential for profit cannot be ignored. The cryptocurrency market, despite its volatility, has shown tremendous growth potential. For a company of Sony's size, even a small slice of this market could represent significant revenue.

Additionally, Sony’s entrance into the market now positions it well to be at the forefront of potential future developments in digital finance and next-gen technologies - whatever those might be. This forward-thinking approach could give Sony a competitive edge as these technologies become more integrated into its business operations and our everyday lives as mass adoption grows.

Sony's entry into the crypto-sphere is a shrewdly timed move that appears to be driven by a combination of technological interest and financial opportunity. While the potential for profit is certainly a factor – they’re entering the space to lose money for heaven’s sake – Sony’s broader Web3 strategy and measured approach to entering the market suggest a belief in the transformative potential of blockchain tech.

The key question moving forward will be how well companies like Sony can adapt to the unique challenges and opportunities presented by the crypto space. Their success or failure could have significant implications for the future of both the cryptocurrency industry and traditional finance.