On May 23, the Japanese government approved a cabinet decision on laws and regulations regarding crypto assets (virtual currencies). These will introduce “travel rules” proposed by the Financial Action Task Force (FATF), which will provide stricter anti-crime restrictions against money laundering and illegal actions. The relevant provisions came into effect on June 1.
The “Travel Rule” requires that sending crypto providers must collect and communicate the information about the originator (sender) and recipient with each party for transactions above a certain amount of assets. This was discussed at the G7 Finance Ministers meeting in Japan in mid-May, and the decision is intended to bring Japan’s legal framework in line with international standards for crypto asset regulation.
One of the characteristics of virtual currencies is their decentralized management system. Globally, some countries have adopted them as legal tender, while others have developed their own legal frameworks, including some regulations. For example, in Georgia, a former Soviet Union country known for its tolerance of virtual currencies, the National Bank of Georgia (NBG) will be required to supervise virtual asset service providers (VASPs) from September 1, 2023, in order to address anti-money laundering.
In Japan, there have been no strict regulations for cryptocurrencies in practice since Bitcoin earned a more established presence in the financial sector in the most recent years, while the Japanese citizens tend to favor anonymity in the digital space. Hence cryptocurrencies have developed a certain position, for example, there are a number of bookmakers that allow deposits in cryptocurrencies. Bookmakers usually require their users to submit ID and other information as part of their KYC policy, but some bookmakers allow users to avoid this process when using cryptocurrencies exclusively.
Japan’s leading crypto asset (virtual currency) exchange bitFlyer announced on May 30 that all deposits and transfers of crypto assets by corporate and individual customers made via bitFlyer will be made available only through crypto exchange that have implemented TRUST (Travel Rule Universal Solution Technology), a system that complies with the Travel Rules.
However, this restriction is limited to 21 countries and regions, including the United States and South Korea, which are required to notify information based on the Travel Rules. In addition, Bitcoin (BTC) and Ethereum (ETH) are among the crypto assets handled by bitFlyer that are subject to TRUST, as well as the cryptocurrencies created under the ERC-20 standard: Basic Attention Token (BAT), Chainlink (LINK), Polygon (MATIC), Maker (MKR), Shiba Inu (SHIB), Palette Token (PLT).