Japan orders crypto exchanges to comply with sanctions against Russia and Belarus

The move comes after a G-7 statement on Friday that said Western countries would “put the costs on illegal Russian entities using digital assets to increase and transfer their wealth.”

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

On Friday, the U.S. Treasury Department released new guidance that requires U.S. crypto companies not to engage in transactions that are subject to sanctions.

“We have decided to make a statement to keep the momentum of the G7 going,” a senior official at the Japan Financial Services Agency said. “The sooner, the better.”

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

Japan has lagged behind a global shift among financial regulators in imposing stricter rules on private digital currencies, while G7 wealthy powers and G20 influencers have called for stricter regulation of stablecoins.

Unauthorized payments to sanctioned individuals, including through crypto assets, carry penalties of up to three years in prison or a fine of 1 million yen ($8,487.52), the FSA said on Monday.

As of March 4, there were 31 cryptocurrency exchanges in Japan, according to the industry association.

Global regulators remain concerned about the safety of the new market for investors given its popularity. The US Securities and Exchange Commission has cited the possibility of market manipulation as one of the main reasons for rejecting several applications for bitcoin spot exchange-traded funds.

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