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Japan Strengthens Anti-Money Laundering Measures for Cryptocurrency Transactions

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In an effort to align its legal framework with global cryptocurrency regulations, Japan has taken firm steps to combat money laundering. Lawmakers recently announced stricter enforcement of anti-money laundering (AML) measures starting June 1. These measures, including implementing “travel rules”, are expected to increase transparency and accountability in cryptocurrency transactions.

On May 23, Japan’s parliament announced plans to introduce stronger AML procedures, responding to concerns raised by the Financial Action Task Force (FATF) regarding the country’s previous regulations. The revised legislation addresses this issue and brings Japan’s anti-money laundering practices on par with international standards.

One of the key provisions in the new measures is enforcing “travel rules”. Under these rules, financial institutions facilitating cryptocurrency transfers in excess of $3,000 must share customer information with the receiving institution, including sender and receiver details and account information. The goal is to build a comprehensive system to track and track potentially illegal funds.

During the G7 meeting held in Japan, global leaders expressed unanimous support for travel regulation and other initiatives by the FATF. The G7 committee recognized the acceleration of global standards for cryptocurrency transactions and addressing emerging risks such as decentralized finance (DeFi) and peer-to-peer transactions.

Japan’s proactive stance towards cryptocurrencies is noteworthy, as the country is an early adopter and has implemented some of the strictest regulations worldwide. The Financial Services Agency (FSA), Japan’s financial regulator, has taken steps to protect investors by tightening rules for crypto exchanges. These measures were introduced after the famous hacking incident involving Mt.Gox and Coincheck.

The FSA requires licensed crypto exchanges to comply with various regulations to ensure customer protection. These regulations include separate custodial accounts for customers and company assets, annual audits to verify ownership, and restrictions on leveraged trading. In addition, licensed exchanges must store at least 95% of customer funds in secure cold wallets.

Recognizing the potential of cryptocurrencies, the Web3 project team of Japan’s ruling Liberal Democratic Party recently published a white paper proposing strategies for expanding the country’s crypto industry. This demonstrates Japan’s commitment to driving innovation while prioritizing consumer safety and regulatory compliance.

Japan’s decision to tighten anti-money laundering measures for cryptocurrency transactions is a significant step towards enhancing global financial security. Japan aims to create a safer and more transparent cryptocurrency ecosystem by aligning with international standards and enforcing stricter regulations.

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