In Japan, the FSA is rolling out a tougher framework for regulating Bitcoin exchanges virtual currency exchanges. This initiative is part of the FSA's broader goal to bolster its anti-money laundering efforts ahead of an upcoming FATF review set for later in the year.
The FSA in Japan is known for crafting detailed rules for the operation of crypto exchange platforms, solidifying the country’s standing as one of the most tightly controlled environments for digital currency trade.
Japan Braces for Tougher Regulations on Bitcoin Trading Platforms
As per the Nikkei Asian Review, the FSA plans plans to ramp up its anti-money laundering defenses, with a highlighted focus on cryptocurrency marketplaces. The agency aims to audit the AML protocols employed by Bitcoin these exchanges to verify compliance with internationally recognized practices.
Japanese crypto exchanges face a rigorous examination process with the FSA, requiring them to demonstrate comprehensive anti-money laundering measures.
This updated FSA approach might heighten compliance obligations for Japanese platforms. The nation is already recognized as one of the most regulated jurisdiction for Bitcoin exchanges in the world.
In 2017, Japan led the charge by establishing a regulatory framework regulatory structure for crypto exchanges, causing prominent players like Binance and OKEx to relocate to less restrictive jurisdictions like Malta.
Since Japan’s 2017 regulations, the FSA has introduced measures on margin trading enhancing both hot wallet and cold wallet security following internal theft allegations, mandating an overhaul of security systems.
Japan Eager for Positive FATF Review
Japan's FSA is undertaking these measures to ensure a positive evaluation from the FATF, an intergovernmental body examining the nation’s finance sector in late 2019.
With Japan hosting the G-20, a poor FATF review could echo the unfavorable assessment of 2008. Back then, the FATF gave the country a low score on anti-money laundering effectiveness.
Speaking on the FSA's determination to secure a favorable FATF review, a representative mentioned:
“Problems with one exchange can impact the overall country’s score. We'll persist with on-site assessments to guarantee everything is stable.”
In October 2018, the FATF aligned its AML criteria to include Bitcoin exchanges. The forthcoming review of Japan will encompass cryptocurrency exchanges, hence the move towards more intense scrutiny. The FATF insists on structured cryptocurrency oversight frameworks incorporating licensing for an effective surveillance system.
Role of Cryptocurrencies in Money Laundering and Related Crimes
Although the FSA is gearing up to scrutinize Bitcoin exchanges, data shows cryptocurrencies make up a small fraction of laundering and financial crime activities.
Japan's National Police Agency issued its money laundering report 2018 report, revealing that crypto-related laundering comprised under two percent of identified cases. Yet, it highlighted a tenfold rise in such activities.
According to Australia's leading consumer watchdog, crypto fraud accounted for a five percent minor portion of fraud cases in 2018, though incidents skyrocketed by 200% from the previous year.
