Foreign Exchange and Foreign Trade Act, Japan’s foreign exchange laws, will undergo revisions in the upcoming parliament session to include crypto exchanges in the regulations governing banks.
This proposed amendment is in line with the sanctions posed by Western countries to Russia following its invasion of Ukraine that started in late February 2022. The revisions are aimed to strengthen the protections against Russia potentially averting global sanctions through digital assets.
Under the clause, crypto exchanges will be required to verify and flag transactions associated with sanctioned Russian individuals or groups as a preventative measure against the aggressions toward Ukraine.
‘[The revision] presumably enables the government to apply the law to crypto-asset exchanges like banks and oblige them to scrutinise whether their clients are Russian sanction targets,’ said Saisuke Sakai, senior economist at Mizuho Research and Technologies, to Reuters.
In a press conference held by Japan’s Chief Cabinet Secretary Hirokazu Matsuno, the government will be submitting the revision soon so that the bill can be introduced quickly to the country.
The newly elected Prime Minister Fumio Kishida supported the proposed revision to be amended by the next parliamentary session. The administration highlighted the need to coordinate moves with Western allies, especially after attending the Group of Seven (G7) summit in Belgium.
This has brought about the growing concerns among the G7 economies that crypto assets are used by Russian entities to evade sanctions since there are loopholes that can be circumnavigated.
The sanctions have forced Russia to look for alternative payment systems and methods to access the international market. Moreover, these preventive clauses also crashed the Russian Rubble’s value amidst the invasion.
Once the parliament amends the law, it would make it a legal compulsion for crypto exchanges to block transactions for the sanctioned Russian officials, oligarchs and financial institutions.
However, earlier this month, Japan’s financial regulatory body already demanded crypto exchanges not to conduct transactions with sanctioned targets posted by Western allies following Russian actions against Ukraine. The law would strengthen the implementation of the sanctions once it’s implemented.
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