Japan preparing reform to enforce FATF travel rules on crypto by May 2023: Report

Japan may introduce new rules on money transfers to allow crypto to be used for money laundering, local news agency Nike reported. The changes bring Japan up to date with Financial Action Task Force (FATF) recommendations.

An amendment to the law to prevent the transfer of criminal proceeds will be introduced in the National Diet on October 3, which will add so-called travel rules on money transfers to crypto, Nikkei reports. The rules will be amended to allow exchange operators to collect customer data in transactions involving cryptocurrencies and stablecoins – as they already do for cash transactions.

The Foreign Exchange and Foreign Trade Act and the International Terrorist Asset Freezing Act will be amended to reflect similar changes, which will take effect in May 2023. The amendment provides for “administrative guidance and corrective orders” for violating exchanges. New laws with criminal penalties for breaching correctional orders.

The amendment incorporates the recommendations of the FATF introduced in 2019 and revised Japanese law for virtual asset service providers in 2021. The FATF is an international watchdog on money laundering and terrorist financing. The agency has had some success in passing the travel rule. According to a report released in April, more than half of the countries studied by the FFF have adequate anti-terrorist financing (CFT) and anti-money laundering (AML) laws and regulations.

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Japan has taken important steps to regulate crypto in recent months. In June, parliament passed a law restricting the issuance of stablecoins by non-banking institutions. In July, the Ministry of Economy, Trade and Industry opened the Web3 Policy Office to promote the Web3 business environment. In addition, there are reports that the Financial Services Agency, Japan’s tax authority, is considering easing capital gains penalties on crypto assets after an uproar in the industry.