Japan to revise digital asset exchange laws to close Russia sanctions evasion loophole

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Japan has pledged to close any loopholes in its digital currency ecosystem that Russia could use to evade sanctions. Senior government officials are set to revise the country’s foreign exchange regulations to ensure that Russians do not use local exchanges.

Reuters reported the news, developer that the Japanese government will submit a revision of the law on foreign exchange and foreign trade to the current parliamentary session.

At a press conference, Chief Cabinet Secretary Hirokazu Matsuno revealed that the government is committed to working with its Western allies to ensure that Russia does not find a way around the crippling sanctions imposed by the United States, European Union, United Kingdom, Canada and other major economies.

In a follow-up, Prime Minister Fumio Kishida further called for the law to be amended during a parliamentary session on Monday. He also stressed the need for coordinated actions with Western allies.

Kishida had recently attended a Group of Seven (G7) summit where Russia’s invasion of Ukraine was the main topic of discussion. The summit intensified the crackdown on Russia through sanctions, including blocking all financial transactions involving the Russian central bank’s international gold reserves as well as increasing humanitarian aid to Ukraine.

It is not yet clear what changes the Japanese government wants to make to the two laws. A finance ministry official told Reuters that government officials were still discussing the proposed changes and nothing concrete had yet been agreed.

However, according to a Japanese economist, the changes will likely subject exchanges to the same regulations as financial institutions.

Speaking to the outlet, Saisuke Sakai, Senior Economist at Mizuho Research and Technologies, said: “The revision presumably allows the government to enforce the law on crypto-asset exchanges like banks and forces them to check whether their customers are targets of Russian sanctions. ”

Japan recently scrutinized digital currency exchanges and the likelihood of Russia using them to move funds as sanctions cripple its financial institutions. Earlier this month, the Financial Services Agency and the Department of Finance required that these exchanges must agree not to facilitate any transactions with sanctions targets. The move was in line with a G7 directive to monitor digital asset transactions for activities related to Russia and Belarus.

“We decided to make an announcement to maintain the momentum of the G7. The sooner the better,” a senior FSA official said at the time.

The Japan Virtual Currency Exchange Association, a self-regulatory entity, responded by saying that it would work with exchanges to comply with the requirement.

“[We] will take guidance and other necessary actions for members who are engaged in crypto asset exchange trading so that they can respond appropriately and smoothly to the response required by this request,” it said. he declares.

Digital assets have become an important factor in the conflict between Ukraine and Russia. Ukraine continued to advocate with the global community for donations, including digital assets. To date, the country has raised more than $100 million in digital asset contributions, the Ministry of Digital Transformation confirmed earlier this month.

There have also been calls for major digital asset exchanges to block Russian users, including by Mykhailo Fedorov, the outspoken deputy prime minister who is also minister for digital transformation.

However, most major exchanges declined to answer the call. Coinbase CEO Brian Armstrong was one of the first to say he would not ban Russian users.

“We believe that everyone deserves to have access to basic financial services, unless the law provides otherwise,” he said. declared.

Kraken’s Jesse Powell agreed, saying banning Russians “is a pretty extreme measure, and it goes way beyond disabling someone’s access to their music streaming service or their photo-sharing app,” alluding to Spotify, which suspended his service in Russia.

And then there’s Binance, which has been accused of working with the Russian government by Michael Chobanian, the founder of KUNA, a Ukrainian exchange whose fundraising efforts have grossed over $60 million.

“The problem with Binance is not only that they continue to work on both sides, it’s that they showed cooperation with the Russian government before the war, and as far as I know, they continue to cooperate with the Russian government,” Chobanian said. Recount a take.

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