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Japan Implements Stricter Anti-Money Laundering Rules to Crack Down on Crypto Crime

2 mins
Updated by Geraint Price
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In Brief

  • Japan's Cabinet wants to introduce stricter crypto AML laws.
  • The development came after a G7 summit in Hiroshima last week.
  • Crypto crime is on a rise, despite strict rules in the country.
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Japan is planning to introduce tighter anti-money laundering (AML) regulations to tackle crypto crime following discussions with the G7 governments.

Although Japan is known for its solid crypto rules, crime is rising. However, the government is gearing up in its fight strict AML laws.

Japan Enforces Travel Rule to Fight Crypto Crimes 

According to Kyodo News, Japan’s Cabinet plans to enforce travel rules from June 1 to tackle money laundering and other criminal activities.

The rule makes it mandatory for exchanges to pass on customers’ details to the other party during crypto transactions.

The development came after the Financial Action Task Force (FATF) claimed that Japan’s AML laws were insufficient. FATF is a global money laundering and terrorist financing watchdog.

The Cabinet’s decision could have also been influenced by the Group of Seven (G7) leadership’s discussion on money laundering at the recent Hiroshima summit meeting.

While Japan is among the few countries having tighter crypto legislation, crypto crimes are still widespread. According to Coincub’s 2022 crypto crime annual report, Japan ranks sixth based on amounts lost to crypto crimes.

The screenshot below shows that in 2022, Japan lost over $1.2 billion to crypto fraud in six cases.

Japan crypto crimes, screenshot from  Coincub
Source: Coincub

Forward-Looking Regulations

While FTX’s most other subsidiaries are going through bankruptcy, FTX Japan resumed customer withdrawals in February.

Some credit Japan’s crypto rules for protecting users’ assets after the FTX collapse. According to Forbes, Japan’s Financial Service Agency’s (FSA) rules include the following:

  • Customer and company assets must be held separately, with holdings verified in annual audits.
  • Investors can’t borrow more than twice their investments for leveraged trades on exchanges.
  • Exchanges must hold at least 95% of customer funds in cold wallets, which are not connected to the Internet.

Masaaki Taira, a member of the House of Representatives, told Forbes:

“While Western financial regulators appear to be single-mindedly focused on tightening regulations in the midst of what is being called a crypto winter, I assess that Japanese financial regulators correctly understand the potential of blockchain and other technologies and are working to design regulations in a forward-looking manner.”

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In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content.

Harsh Notariya
Harsh started investing in crypto during the 2021 bull market. He took the opportunity of the market crash in May to learn more about Bitcoin and blockchain technology. Since...