Japanese authorities are proposing new restrictions that would bring crypto exchanges under the purview of its Foreign Trade and Foreign Exchange Law.
The move comes as Japan wants crypto firms not to process transactions involving crypto assets subject to asset-freezing sanctions against Russia over the war in Ukraine.
Hirokazu Matsuno, the country’s cabinet representative, said at a press conference that the government plans to introduce a bill to revise its foreign exchange and trading law to include cryptocurrency exchanges. Under this new proposal, crypto exchanges will act like regular banks in that they would be required to check and flag suspicious activity, including transactions related to sanctioned countries.
According to officials, unauthorized payments to sanctioned entities or individuals, including with digital assets, whether NFTs or cryptocurrencies, will be sanctioned.
Although the proposed revision does not prohibit the country’s 31 crypto platforms from facilitating transactions with Russia-based wallets, it does impose stricter compliance requirements. This compliance is intended to address concerns that oligarchs in Belarus and Russia may turn to cryptocurrencies to avoid financial sanctions imposed by the invasion of Ukraine.
Russia can use cryptocurrencies to reverse sanctions
Available information shows that many Russian entities and individuals are seeking to liquidate their assets to acquire properties in crypto-friendly regions, such as the United Arab Emirates, through cryptocurrencies. Russia is also reportedly considering the idea of accepting Bitcoin or other cryptocurrencies as payment for its oil and gas sold to “friendly countries,” a senior lawmaker said this week.
Japan stands out in Asia when it comes to the regulatory aspect, especially after several jurisdictions, such as China and India, made it almost impossible for cryptocurrency companies to exist.
Even before the recent geopolitical crisis, Japan’s Financial Services Agency (FSA) said earlier this year that it is seeking to establish stricter regulations on cryptocurrencies. The watchdog has had to implement stricter rules after a series of attacks in recent years have seen investors lose billions of dollars.
For this purpose, the financial regulator established a unit dedicated to overseeing the cryptocurrency business, as well as a panel of experts on the subject. Meanwhile, the Bank of Japan has started a central bank digital currency experiment, though it says it has no plans to issue one at this time.