FameEX Hot Topics | Japan to Implement Stricter Anti-Money Laundering (AML) Regulations for Cryptocurrency, 'Travel Rule' in June

Stricter anti-money laundering (AML) measures for the cryptocurrency sector in Japan are set to be enforced starting from June 1, as reported by local media. These new regulations aim to align Japan's legal framework for cryptocurrencies with international standards, allowing the government to trace digital asset transactions.

The decision to implement more stringent AML rules for cryptocurrency operations was made by the Cabinet of Japan, the executive power in Tokyo. The move comes as a response to recommendations from the Financial Action Task Force (FATF), an intergovernmental organization focused on combating money laundering and terrorism financing.

In December 2022, Japanese lawmakers amended the relevant laws to address the FATF's concerns about the country's previous AML procedures being insufficient. Additionally, regulatory bodies in Japan have been enhancing their monitoring efforts to identify potential cases of money laundering involving crypto assets.

One key mechanism introduced to improve tracking of digital money is the "travel rule." Under this rule, service providers are required to identify both the sender and receiver of cryptocurrency transfers, ensuring that this information accompanies each transaction.

The updated regulations extend beyond cryptocurrencies like bitcoin to include stablecoins pegged to fiat currencies such as the U.S. dollar or various commodities. Entities that fail to comply with corrective orders issued by Japanese regulators may face criminal prosecution.

These developments in Japan follow the recent summit of the Group of Seven (G7) developed economies, which includes Japan as a member. Prior to the meeting, the President of FATF, T. Raja Kumar, called on G7 nations to put an end to the "lawless crypto space" in an article. Pakistan also recently announced its intention to ban online crypto services in line with FATF requirements.

With the enforcement of stricter AML regulations, Japan aims to enhance the integrity of its cryptocurrency sector and combat illicit activities such as money laundering. By aligning its legal framework with global standards, the government seeks to foster trust and security within the digital asset ecosystem while allowing for more effective tracking of digital transactions.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.