Japan to bring crypto within FATF Travel Rules by May 2023 to track illicit transfers
|- The Financial Action Task Force (FATF) has been recommending Japan adopt the Travel Rules for cryptocurrencies since 2019.
- Following the implementation of Travel Rules, crypto exchanges in Japan will be mandated to provide customer information on every transaction.
- The new bill will not only include traditional tokens but also apply to stablecoins.
The privacy that comes with the use of cryptocurrencies has been both a bane and a boon for the community. Boon because it has made finances more of a personal affair but bane because it has also made it an effective medium of illicit financial activities.
To deal with the same, the Financial Action Task Force (FATF), an inter-governmental policymaking body, came up with the Travel Rules, which are now reaching all ends of the world.
Japan to monitor crypto transfers
The Travel Rules are basically the enforcement of anti-money laundering and counter-terrorist financing measures. They require financial institutions to share relevant originator and beneficiary information alongside virtual asset transactions.
A draft amendment of the Japanese law is set to be submitted to the Diet session set to take place on October 3. Once the bill goes through, it will bring cryptocurrencies under the Travel Rules.
This will mandate all operating cryptocurrency exchanges in Japan to provide each other with the name and address along with the other information. Through this process, the regulators will be able to figure out when and where cryptocurrencies are sent.
These exchanges will also face criminal penalties along with corrective orders and administrative guidance should they break the rules established by the law.
Beyond the traditional network, exchange and protocol tokens, the law will also be applicable to stablecoins. The Act on Prevention of Transfer of Criminal Proceeds is targeted toward tracking the money transfers between individuals flagged for illegal activities.
Not the first to do so
While Japan could see the enforcement of these Travel Rules by May 2023, countries like the United States of America, Germany, Singapore, among others, have already adopted them. Furthermore, the European Union is also on the way to doing the same.
Enforcing these laws will also allow Japan to monitor and halt funding to North Korea, which has been known to hack and take ransom used for the country’s missile systems.
In fact, the likes of Russia, which have been sanctioned by Japan following the invasion of Ukraine, will also be prevented from accessing funds in this country. This will be possible thanks to the inclusion of stablecoins in the Travel Rules, which will prevent the transfer of money to sanctioned Russian individuals.
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