Japan enforces “travel rule” for crypto exchanges in June
Japan is preparing to enforce stricter anti-money laundering measures, which will include the implementation of the “travel rule” recommended by the Financial Action Task Force (FATF).
The travel rule requires cryptocurrency exchanges and other virtual asset service providers to collect and share customer information during transactions to enhance transparency and combat money laundering and terrorist financing.
Japan’s cabinet plans to implement the new measures starting from June 1. The new rules also mandate the crypto exchanges to collect names, addresses, and other identifiable information at each stage of a transaction. It has also been extended to cover virtual asset service providers.
Japan’s recent decision to implement the travel rule aligns with the global standards supported by the G-7. As the current presidency holder of the G-7, Japan’s move can be seen as a step to conform with international norms and demonstrate its commitment to combating money laundering and promoting financial transparency in the crypto industry.
Earlier in March, Japan’s Finance Ministry has created an advisory panel to look at the feasibility of issuing a central bank digital currency, otherwise known as “CBDC”.
The government panel of experts will discuss how to create a framework for a digital yen, joining a growing number of countries seeking to catch up to front-runner China.
The launch of the panel coincides with the start of a CBDC pilot program following two years of proofs of concept (PoC). The BOJ, financial institutions and other private-sector participants will conduct simulated transactions under the pilot program in a test environment. However, the central bank does not plan to conduct actual transactions among retailers and consumers.
Additionally, three Japanese banks are set to develop a payment system that integrates their stablecoins on a public blockchain while satisfying legal requirements.
Shortly after Japan overturned a ban on fiat-pegged cryptocurrencies, Tokyo Kiraboshi Financial Group, The Shikoku Bank, and Minna no Bank launched a stablecoin experiment. This initiative is powered by Web3 infrastructure provider GU Technologies, which develops a public blockchain that’s fully compatible with Ethereum, dubbed ‘Japan Open Chain’.
The new regulations will be part of the revised Payment Services Act which will come into effect this year. If approved, it would allow Japanese exchanges to list and trade popular stablecoins like Tether (USDT) or USD Coin (USDC).
The legal revision primarily introduces a registration system for stablecoins circulation and reinforces anti-money laundering measures. Additionally, it enables overseas businesses to issue stablecoins in the country through custodians of digital assets.
Under the new law, stablecoins can be issued by licensed banks, registered money transfer agents and trust companies. Stablecoin licenses are expected to be issued only to highly credible businesses in charge of issuing and managing them, as well as intermediaries responsible for circulation.
The Japanese watchdog has repeatedly voiced doubts surrounding the anti-money laundering measures. As a result, none of the 31 Japanese crypto exchanges registered with the FSA list any stablecoins.
