In a bid to align its legal framework with global cryptocurrency regulations, Japan has taken a decisive step toward combating money laundering. Lawmakers have recently announced the enforcement of stricter anti-money laundering (AML) measures from June 1. These measures, including implementing the “travel rule,” are expected to enhance transparency and accountability in cryptocurrency transactions.
On May 23, the Japanese parliament unveiled its plan to introduce more robust AML procedures, responding to concerns raised by the Financial Action Task Force (FATF) regarding the country’s previous regulations. The revised legislation addresses these concerns and brings Japan’s anti-money laundering practices up to par with international standards.
One of the key provisions in the new measures is enforcing the “travel rule.” Under this rule, financial institutions facilitating cryptocurrency transfers exceeding $3,000 must share customer information with the receiving institution, including sender and recipient details and account information. The objective is to establish a comprehensive system for tracking and tracing potentially illicit funds.
During the G7 meeting held in Japan, global leaders expressed unanimous support for the travel rule and other initiatives by the FATF. The G7 Committee acknowledged accelerating global standards for cryptocurrency transactions and addressing emerging risks such as decentralized finance (DeFi) and peer-to-peer transactions.
Japan’s proactive stance on cryptocurrency is noteworthy, as the country was an early adopter and has implemented some of the strictest regulations worldwide. The Financial Services Agency (FSA), Japan’s financial regulator, has taken steps to safeguard investors by tightening rules for crypto exchanges. These measures were introduced following the infamous hacking incidents involving Mt.Gox and Coincheck.
The FSA requires licensed crypto exchanges to adhere to various regulations to ensure customer protection. These regulations include separate custodial accounts for customer and company assets, annual audits to verify holdings, and limitations on leveraged trading Additionally, licensed exchanges must store at least 95% of customer funds in secure cold wallets.
Recognizing the potential of cryptocurrencies, the Web3 project team of Japan’s ruling Liberal Democratic Party recently published a white paper proposing strategies to expand the country’s crypto industry. This demonstrates Japan’s commitment to fostering innovation while prioritizing consumer safety and regulatory compliance.
Japan’s decision to tighten anti-money laundering measures for cryptocurrency transactions is a significant step toward enhancing global financial security. Japan aims to create a safer and more transparent cryptocurrency ecosystem by aligning with international standards and enforcing stricter regulations.
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