So I think merfolk au goes like this:

Dr. Kogami (of the Hanoi Institute of Ocean Sciences) finds out that his son made friends with a merkid so he nabs Yusaku and a bunch of other merkids to experiment on them. They figure out how mer magic works, and as a result they create 1. (on accident, while isolating mer magic) the Ignis, which are tiny future sea monsters, and 2. a way for humans to transform into merfolk and vice versa. The merfolk also get their hands on this, but mer-human relations aren't particularly great (see: Lost Incident), so it becomes a guessing game of fish among humans and humans among fish.

Yusaku is a parrotfish. I mostly chose this based off of his coloration. Parrotfish are known for biting people. He also might be a swordfish though, I can't really decide.

Kusanagi and Jin are both eels. Jin is an electric eel. Lightning takes after him. Kusanagi spends a lot of time on land and runs a hot dog stand on the pier, using it as a cover while he tries to find the human scientists that experimented on his little brother. Yusaku often joins him.

Takeru retreated to the deep sea after the Lost Incident, and only returned to the shallows after Flame told him about Yusaku kicking the shit out of the Hanoi Institute. He eventually goes on land as well.

Ai is an octopus. When he's tiny he never leaves Yusaku alone and constantly sticks to him. He grows to a massive size eventually and achieves full sea monster status. He still sticks to Yusaku.

Aoi and Zaizen are both human, but Aoi spent a lot of time by the sea growing up and became friends with Miyu. This was why Miyu got taken, she was too friendly with humans. Once transformation magic becomes available, Aoi spends a lot of time in the sea looking for Miyu, and meets Aqua along the way. Aoi is a sea slug, specifically Glaucus atlanticus, otherwise known as a blue angel. Miyu might be a dolphin. Aqua strikes me as a jellyfish. Windy is a flying fish. Earth might be some sorta crustacean. Ema is a sea witch, she figured out the human transformation thing long before anyone else did and spends most of her time on land after she fell in love with motorcycles.

Ryoken is human. Yusaku and Co. used to only know him as "Harpoon" bc well. he was always brandishing a harpoon at them. When transformed, he is a shark. Scary, but otherwise harmless when not actively hunting. Ryoken's yacht becomes a very important base of operations in merfolk au.

Spectre is a remora. you know, those guys always sticking to sharks. Now that I think about it, he can also stick to the bottom of the yacht. He turned his back on merfolk society and spends most of his time on land.

Ryoken doesn't end the Lost Incident by calling the authorities btw. The human authorities are on the same side as Dr. Kogami, so Ryoken breaks Yusaku out himself and then they break all the other kids out and accidently release the Ignis in the process. The kids escape into the ocean, and the merfolk (just Lightning actually) kill Ryoken's dad by capsizing his boat at sea. Ryoken then goes on his thing about hunting down the Ignis before they can become full-grown sea monsters and drown the world in ocean.