Japan Strengthens Anti-Money Laundering Measures for Cryptocurrency Transactions, Effective June 1st
Japanese legislators have opted to implement stricter measures against money laundering in relation to cryptocurrency transactions starting from June 1.
According to a recent report by local media outlet Kyodo News, on May 23, the Japanese parliament reached a decision to introduce more rigorous anti-money laundering procedures, aiming to align Japan’s legal framework with global regulations governing cryptocurrencies.
In December, lawmakers amended the anti-money laundering legislation after it was found inadequate by the international financial watchdog, the Financial Action Task Force (FATF).
One significant aspect of the new measures is the enforcement of the “Travel Rule” to enhance the tracing of illicit funds.
Under this rule, financial institutions handling cryptocurrency transfers exceeding $3,000 are required to share customer information with the receiving exchange or institution. The information should include the sender’s and recipient’s names, addresses, and account details.
The Travel Rule was a subject of discussion among global leaders during the G7 meeting held in Japan in mid-May.
The G7 Committee expressed explicit support for the Travel Rule in crypto transactions and backed FATF initiatives aimed at expediting global standards for cryptocurrencies.
This includes addressing the Travel Rule and addressing emerging risks related to DeFi arrangements and peer-to-peer transactions.
It is worth noting that Japan emerged as an early adopter of cryptocurrency, recognizing it as a form of property and establishing robust regulations that are among the most stringent worldwide.
In response to major hacking incidents involving exchanges like Mt.Gox and Coincheck, the Financial Services Agency (FSA) of Japan implemented stricter rules for crypto exchanges.
These rules aim to safeguard customers and include measures such as maintaining separate holdings of customer and company assets, subject to annual audits to ensure compliance.
To mitigate risks, investors are limited to borrowing a maximum of twice their investments for leveraged trades on exchanges. Additionally, licensed crypto exchanges are required to store at least 95% of customer funds in cold wallets, which offer enhanced security against potential cyber threats.
In April, the Web3 project team associated with Japan’s ruling Liberal Democratic Party released a white paper presenting proposals to foster the growth and development of the country’s cryptocurrency industry.
