Japan looks to crack down on money laundering in crypto industry
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(Kitco News) - Japanese lawmakers have elected to bring the country’s legal framework in line with global standards and will enforce stricter anti-money laundering (AML) measures for digital asset transactions beginning June 1.
According to a report from the local news agency Kyodo, this announcement follows the December revision the cabinet made to AML legislation after it was deemed insufficient by the Financial Action Task Force (FATF), an international standard-setting financial watchdog.
The move to step up enforcement comes as oversight organizations around the world have been strengthening their crypto monitoring activities in an effort to cut down on money laundering, eliminating a popular method used by criminals to wash money obtained from illegal activities.
A key focus of the new measures is the enforcement of the “travel rule” as a way to keep a more accurate track of criminal transactions.
The travel rule requires any financial institution that processes a crypto transfer greater than $3,000 to pass on customer information to the recipient exchange or institution, including the name and address of the sender and recipient and account information.
Along with tracking the activity of major cryptocurrencies like Bitcoin (BTC) and Ether (ETH), stablecoins and cryptocurrencies that are pegged to a currency like the U.S. dollar or a commodity are also a point of focus for increased monitoring.
Japan appears to be following up on discussions related to the travel rule that took place at the G7 meeting in mid-May, which was held in Hiroshima. The G7 Committee made it clear that applying the travel rule to cryptocurrency transactions was a top priority.
“Illicit financial flows weaken the global financial system, delay growth and hinder development, FAFT President T. Raja Kumar wrote ahead of the G7 meeting. “They fuel serious crimes – such as terrorism, drug trafficking, human trafficking, corruption and environmental crime – that threaten our safety, security and society.”
“While the risks have increased, crypto assets continue to operate in a virtually lawless global environment,” he said. “Countries need to take urgent action to shut down lawless spaces, which allow criminals, terrorists and rogue states to use crypto assets. G7 countries should lead by example and regulate the crypto sector so that no virtual safe havens exist for illicit financial transactions. This includes implementation of the ‘travel rule’, which requires virtual assets service providers to identify the sender and receiver of the transaction.”
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Japan has been one of the earliest adopters of blockchain technology and cryptocurrencies, going so far as to legalize them as property. The country also has some of the most stringent cryptocurrency regulations, which were tightened following the hacks of the Mt. Gox and Coincheck cryptocurrency exchanges.
In October, the Japan Credit Bureau (JCB), the country’s equivalent of an international payment system like Visa or Mastercard, announced the start of the “JCBDC” project, which is designed to develop and test settlement solutions for central bank digital currencies (CBDC).
In March, Tokyo Kiraboshi Financial Group, Minna no Bank and The Shikoku Bank announced plans to issue stablecoins on an Ethereum-compatible blockchain known as Japan Open Chain. The early stages of the project are designed to explore the issuance and remittance of electronic payments, while later stages will eventually move toward the creation of a stablecoin system involving local jurisdictions and private companies.