TL;DR Breakdown
The Japanese parliament has recently decided to implement stricter Anti-Money Laundering (AML) measures starting from June 1st. This move comes as a response to the international financial watchdog, the Financial Action Task Force (FATF), deeming Japan’s previous AML legislation insufficient. The aim is to align Japan’s legal framework with global cryptocurrency regulations.
One of the key features of the new measures is the enforcement of the “Travel Rule” in order to enhance the tracking of criminal proceeds. The Travel Rule requires financial institutions processing cryptocurrency transfers exceeding $3,000 to provide recipient exchanges or institutions with customer information. This information includes the name, address, and account details of both the sender and recipient.
The G7 Committee, which met in Japan in mid-May, expressed support for the Travel Rule and emphasized the importance of global standards for cryptocurrencies. The Committee also acknowledged the work of the FATF in addressing emerging risks related to decentralized finance (DeFi) arrangements and peer-to-peer transactions.
The country has been an early adopter of cryptocurrencies, having legalized them as a form of property. The country’s crypto regulations are known for being among the most stringent worldwide. The Financial Services Agency (FSA), Japan’s financial regulator, has implemented several rules for crypto exchanges to protect customers. These rules include separate holdings of customer and company assets, annual audits to verify holdings, limitations on leverage trading, and the requirement for licensed exchanges to hold at least 95% of customer funds in cold wallets.
In April, the Web3 project team of Japan’s ruling Liberal Democratic Party published a white paper proposing strategies to expand the country’s crypto industry. This indicates the government’s interest in fostering the growth and development of cryptocurrencies within a regulated framework.
By implementing stricter AML measures and enforcing the Travel Rule, the country aims to enhance transparency and security in cryptocurrency transactions. These efforts align with global trends and the growing recognition of the need for robust regulations in the crypto space. The new measures will contribute to strengthening Japan’s position as a leader in crypto regulation and may serve as a model for other countries looking to bolster their AML frameworks in the context of digital assets.
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