The Japanese authorities have ordered cryptocurrency exchanges on March 14 not to process transactions involving crypto-assets subject to asset-freeze sanctions against Belarus and Russia over the war in Ukraine.
This step was taken after a Group of Seven (G7) statement on March 11 that said Western nations:
“Will impose costs on illicit Russian actors using digital assets to enhance and transfer their wealth.”
There are increasing fears among G7 advanced economies that cryptos are being used by Russian entities as a loophole for multiple financial sanctions imposed on the nation for invading Ukraine. The U.S. Treasury Department published new guidance on March 11 that needed US-based crypto companies not to engage in transactions with sanction targets.
A senior official at Japan’s Financial Services Agency stated:
“We decided to make an announcement to keep the G7 momentum alive. The sooner the better.”
The Japanese government will boost measures against the transfer of funds using cryptocurrency assets that may violate the sanctions, the FSA and the Ministry of Finance stated in a joint statement. Japan has lagged a global move among various financial regulators in creating stricter rules on private digital currencies, while the G7 rich powers and the Group 20 powerhouses have all supported greater regulation of ‘stablecoins’.
Illegal payments to targets under sanctions, including via crypto assets, are subject to punishment of up to 3 years in prison or a 1 million yen ($8,487.52) fine, the FSA said on March 14. As of March 4, there were 31 crypto exchanges in Japan, based on an industry association.
Global regulators remain worried about the safety of the new market for the investors, given its growth in popularity. The U.S. Securities and Exchange Commission has now cited the possibility for market manipulation as one of the key reasons for rejecting many applications for spot bitcoin exchange-traded funds.