Japan will implement stricter rules for exchanges, including implementing the FATF travel rule, to combat money laundering and ensure transparency in cryptocurrency transactions.
On May 23, Japan announced that it will implement stricter measures against money laundering (AML) in cryptocurrency transactions starting from June 1, in order to comply with global regulations.
according to Kyodo NewsThe decision to strengthen the regulations was taken after a review of relevant laws in December, when it was determined that existing measures were insufficient, according to the Financial Action Task Force (FATF), an international financial oversight organization.
Japan applies stricter rules for exchanges
One of the most notable features of the new regulatory framework is the implementation of the FATF’s so-called “travel rule”, which requires financial institutions to provide detailed information about their customers’ transactions, including all their registration data such as names and addresses. Those who fail to comply with the regulations will face criminal penalties.
With this measure, Japan aims to combat money laundering and ensure greater transparency globally in cryptocurrency transactions. In addition, by aligning with global standards, the Asian country will strengthen its position in the cryptocurrency industry, providing greater confidence to both investors and users.
It is worth noting that cryptocurrency regulations in Japan are among the strictest in the world, with rules on separate holdings, leverage limits, and the storage of customer funds in cold wallets. This is because Japan was one of the first countries to legalize cryptocurrency.
In March 2021, the Japan Financial Services Agency required Cryptocurrency exchange travel rule implemented in response to the Mt.Gox hack, which resulted in thousands of people losing billions of dollars.
The FATF travel rule is stricter than that of Japan
The Financial Action Task Force (FATF) Travel Rule was issued in 2019 for the Group of Seven, an organization made up of the world’s seven largest economies, including Canada, France, Germany, Italy, Japan, the United Kingdom and the United States.
The controversial a base Officially known as FATF, Recommendation 16 requires Virtual Asset Service Providers (VASPs) to report user transactions that exceed amounts of $1,000. This threshold may vary depending on each country’s regulations. For example, the minimum reporting threshold in the United States is $3,000.
Implementation of these stricter rules is linked to multiple hacks and market manipulations by various actors in the cryptocurrency ecosystem, who have used digital assets to engage in illicit activities such as financing terrorism and sending money to sanctioned countries.
Therefore, implementing the Financial Action Task Force (FATF) travel rule would help make it easier for cryptocurrencies to be tracked by law enforcement, opening the door to more consistent global regulation.
However, one of the most important challenges posed by this regulation is the disclosure of user data, so it is necessary to put in place security measures that protect those users who use cryptocurrencies on a daily basis as an alternative to fiat money and not for illegal activities.
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