The Japanese government is set to introduce new remittance regulations to curb criminals from utilising crypto exchanges, crypto platforms and DEX to launder money. Crypto Lists support the strong work from the Japanese government to apply new rules and regulations for anti money laundering.
The country has already set up the Prevention of Transfer of Criminal Proceeds Act which effectively limits criminal funds from being transferred. The new rules require an amendment to the Act for crypto exchanges to unveil information on their customers transacting between platforms. This will assist Japanese authorities to track money transfers by individuals flagged in illegal activities. The nation expects to have these new rules take effect from May 2023.
New rules on crypto curbing Crypto Money Laundering in Japan
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An extraordinary National Diet will be held on the 3rd of October and the draft amendment of this Act will be presented. This will enable crypto inclusion in the travel rules on money transfers. The Financial Action Task Force (FATF) issued recommendations to Japan to implement its Travel rules from 2019. The United States, Germany, Singapore, and other nations have adopted these rules. Additionally, the European Union is prepping to do the same with the MICA regulation.
The amendment proposes that crypto exchanges collect customers’ information in transactions involving cryptocurrencies and stablecoins similar to cash transactions.
The Society for Worldwide Interbank Financial Telecommunications (SWIFT) records and traces international cash transfers amongst banks while domestic cash transactions are handled by the Japanese Bankers Association’s Zengin System. These transactions record customer information.
A registration system for stablecoins
Stablecoins like USDT, USDC and PAXG is a type of cryptocurrency linked to legal tender. The distribution of stablecoins ought to undergo a registration system. Implementation of the new regulation in May 2023 will bar transfers to and from sanctioned entities. This will be implemented in Japan after the revised Fund Settlement Act, passed during the ordinary Diet session, takes effect. The Japanese government anticipates a cryptocurrency spread. In preparation, the government is urging a comprehensive monitoring system for cryptocurrencies.
Crypto exchanges have to disclose a customer’s name and address as they transfer cryptocurrency to another exchange. The International Terrorist Asset-Freezing Act and The Foreign Exchange and Foreign Trade Act will also reflect these changes. The bill is set to be passed and take effect from May 2023 and will assist authorities in identifying the time and location of criminals as they send cryptocurrency.
The new legislation will also enable persons connected to the nuclear projects of North Korea and Iran to have their financial and real estate dealings in Japan subject to regulation. These designated parties were sanctioned parties under a U.N. Security Council resolution but not the International Terrorist Asset-Freezing Act. The FATF has been pushing for this legislation to avoid loopholes in funding nuclear development.
The amendment is clear that exchange operators that do not adhere to the collection and disclosure of customers’ information are to face subsequent consequences. Breaking the rules leads to these operators being issued with administrative guidance and corrective orders. There will be criminal penalties for violations of the corrective orders. To Crypto Lists surprise, nothing about new cryptocurrencies are mentioned in the latest efforts from the Japanese authorities. That is surprising, considering that many of the newest entrants struggle to follow compliance and are more likely to do scams. Check out our warning list for the lastest coins and businesses to stay away from.
Cryptocurrencies have provided users anonymity and privacy when carrying out transactions. These have seen increased interest in them which has been both beneficial and a burden to several economies. It has been beneficial as finances grow to be a personal affair while it has burdened economies as illicit activities take advantage of its features as an effective medium.
The Financial Action Task Force (FATF), an intergovernmental policy body, developed Travel rules to apply globally. These Travel rules enforce anti-money laundering and counter-terrorist financing measures. They also require financial institutions to disclose relevant originator and beneficiary information with virtual asset transactions. The FATF has had limited success in persuading countries to adopt its Travel rule. A FATF survey in April indicated that more than half of the countries had sufficient laws and regulations for Combating the Financing of Terrorism(CFT) and Anti-Money Laundering(AML).
Japan’s crypto exchanges have been negotiating with the government on sharing customer information since last March. During this period, Japan’s Financial Services Agency (FSA) ordered exchanges to implement a framework for fulfilling FATF’s Travel rule. There has been concern by exchanges on the heavy compliance costs.
In recent months, Japan has driven crypto regulation, as reported by Crypto Lists. There is a law that limits the issuance of stablecoins by non-banking institutions. The Ministry of Economy, Trade, and Industry also opened a Web3 policy office to encourage a Web3 business environment.