Japan urges crypto firms to comply with sanctions against Russia

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A man stands near an advertisement of a cryptocurrency exchange in Tokyo, Japan March 30, 2018. REUTERS/Toru Hanai/Files
A man stands near an adver­tise­ment of a cryp­tocur­ren­cy exchange in Tokyo, Japan March 30, 2018. REUTERS/Toru Hanai/Files

TOKYO (Reuters) ‑Japan­ese author­i­ties ordered cryp­to exchanges on Mon­day not to process trans­ac­tions involv­ing cryp­to assets sub­ject to asset-freeze sanc­tions against Rus­sia and Belarus over the war in Ukraine.

The step was tak­en after a Group of Sev­en (G7) state­ment on Fri­day that said West­ern nations “will impose costs on illic­it Russ­ian actors using dig­i­tal assets to enhance and trans­fer their wealth.”

There are grow­ing con­cerns among G7 advanced economies that cryp­tocur­ren­cies are being used by Russ­ian enti­ties as a loop­hole for finan­cial sanc­tions imposed upon the coun­try for invad­ing Ukraine.

The U.S. Trea­sury Depart­ment issued new guid­ance on Fri­day that required U.S.-based cryp­tocur­ren­cy firms not to engage in trans­ac­tions with sanc­tion targets.

“We decid­ed to make an announce­ment to keep the G7 momen­tum alive,” said a senior offi­cial at Japan’s Finan­cial Ser­vices Agency. “The soon­er the better.”

The Japan­ese gov­ern­ment will strength­en mea­sures against the trans­fer of funds using cryp­to assets that would vio­late the sanc­tions, the FSA and the Min­istry of Finance said in a joint statement.

Japan has lagged a glob­al shift among finan­cial reg­u­la­tors in set­ting stricter rules on pri­vate dig­i­tal cur­ren­cies, while the G7 rich pow­ers and the Group of 20 pow­er­hous­es have all called for greater reg­u­la­tion of “sta­ble­coins”.

Unau­tho­rised pay­ments to tar­gets under sanc­tions, includ­ing through cryp­to assets, are sub­ject to pun­ish­ment of up to three years in prison or a 1 mil­lion yen ($8,487.52) fine, the FSA said on Monday.

There were 31 cryp­to exchanges in Japan as of March 4, accord­ing to an indus­try association.

Glob­al reg­u­la­tors remain con­cerned about the safe­ty of the new mar­ket for investors, giv­en its surge in pop­u­lar­i­ty. The U.S. Secu­ri­ties and Exchange Com­mis­sion has cit­ed the poten­tial for mar­ket manip­u­la­tion as one of the pri­ma­ry rea­sons for reject­ing sev­er­al appli­ca­tions for spot bit­coin exchange-trad­ed funds.

($1 = 117.8200 yen)

(Report­ing by Tet­sushi Kaji­mo­to, Daniel Leussink and Kan­taro Komiya; Edit­ing by Jacque­line Wong and Sam Holmes)

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