Commencing June, financial institutions in Japan will have to comply with stringent AML regulations. These measures are aimed at enhancing transparency and mitigating illicit activities. This will have a whole lot of impact on the regulatory landscape of the Japanese cryptocurrency market.
Strengthening AML Compliance In Japan’s Cryptocurrency Sector
Reports by a local media outlet, Kyodo News, the move intends to attract Japan’s judicial system in line with worldwide cryptocurrency regulations. Japan has taken a decisive step towards bolstering its anti-money laundering (AML) efforts in cryptocurrency.
Nonetheless, the decision to strengthen AML procedures comes after the revision of legislation in December after it was deemed insufficient by the international financial watchdog, the Financial Action Task Force (FATF)
Nonetheless, one notable feature of the new measures is implementing the “travel rule.” The standard is designed to support better tracking of illicit funds. Under this rule, any financial institution processing a cryptocurrency transfer more whole lot of than $3,000 must pass on customer information to the recipient exchange or institution. The data should include the name and address of the sender, recipient and account information.
Noteworthy, the significance of the Travel Rule gained further understanding during the G7 meeting held in Japan in mid-May. The Worldwide leaders at the summit, through the G7 meeting, expressed their support for the travel rule in the cryptocurrency transaction. The committee affirmed its backing for FATF’s initiatives in establishing revved worldwide standards for digital currencies, emphasizing the travel rule’s importance. In addition, it acknowledged the must address emerging dangers from decentralized finance (DeFi) arrangements and peer-to-peer transactions.
“G7 countries should lead by example and regulate the cryptocurrency sector so that no safe havens exist for illicit cryptocurrency transactions”#FATF President T. Raja Kumar´s message to #G7 leaders ahead of the summit in Japan
Read article: https://t.co/l1OTdjGgLY
— FATF (@FATFNews) May 18, 2023
Other measures include stricter know-your-customer (KYC) requirements, transaction monitoring, and reporting obligations for digital currency exchanges and service providers. By enforcing robust AML regulations, Japan intends to safeguard its financial system and foster trust in the cryptocurrency industry.
Understanding Cryptocurrency Regulation In Japan
Nonetheless, Japan has positioned itself as a cryptocurrency-regulation pioneer by legalizing digital assets as property. The country’s regulatory framework concerning digital currencies, is among the most strict universally. This comes as Financial Service Agency (FSA) tightened regulations following the major hacks of the exchanges, including Mt.Gox and Coincheck.
It’s worth noting that, the FSA has numerous measures for exchanges to guard customers, including separate company and customer assets holdings, with holdings certified in annual audits. Still, investors can borrow up to twice their financing for leveraged trades on cryptocurrency exchanges. Nevertheless, licensed cryptocurrency platforms must hold at least 95 percent of users’ funds in cold wallets.
It is worth keeping in mind that with Japan’s decision to enforce stringent standards for digital currency transactions, the country is taking another step in aligning its regulatory framework with worldwide measures.