The Japanese government has approved the Cabinet’s decision to amend the laws regulating digital asset service providers to stifle the incidences of money laundering.
According to a local publication, six laws relating to the Foreign Exchange Act were revised to align with the country’s toughening stance on money laundering. A key revision point includes imposing stiffer penalties on firms and individuals involved in breaching anti-money laundering (AML) rules.
To discourage the occurrence, law enforcement agencies have been saddled with the power to freeze the assets of defaulters, while service providers in the digital asset industry have been ordered to increase the monitoring of customers of their platforms.
Under the new monitoring regime, Japanese virtual asset firms must “acquire information on the recipient’s address and information on the purpose of the transaction.”
The Cabinet’s decision to enforce tighter regulation against money laundering was first highlighted in a Nikkei report in September, which predicted that the government was plotting to amend the Act on Prevention of Transfer of Criminal Proceeds to prevent the usage of digital currencies from circumventing national financial laws.
Local exchanges appear to have accepted the new regime of regulations, with Coincheck and GMO Coin already implementing the policy for their customers. Other exchanges in the country look set to toe the same path, with Japan Crypto Asset Exchange Association (JVCEA) issuing a directive for its members to follow the latest rules.
Coinpost reports that the revised laws will be submitted to the current parliamentary session, with experts predicting minimal impediments from lawmakers.
Tighter AML rules, but firms still flock to Japan
The stiff AML rules in Japan have done little to dampen the enthusiasm of service providers looking to set up operations in the country. Binance, the largest exchange in the world, gained approval from regulators to return to the country after a four-year absence.
Crypto.com and FTX are part of a litany of foreign firms that have received approval to set up shop in Japan as the country softens its stance towards virtual currencies.
The Financial Services Agency (FSA) remains thorough in vetting firms looking to operate within the country’s borders, with FTX Chief Executive Officer Sam Bankman-Fried noting that “Japan is a highly regulated market with a potential market size of almost $1 trillion.”
The decision to tighten AML procedures is a direct fallout of the directive issued by the Financial Action Task Force (FATF), the world’s financial watchdog. FATF’s Travel Rule mandates virtual asset service providers (VASPs) “to share relevant originator and beneficiary information alongside virtual asset transactions,” which Japan’s regulators hope to implement in its entirety.
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