Already having one of the strictest cryptocurrency regulations in the world, Japan is going to introduce even stricter measures against money laundering in the crypto industry starting from 1 June 2023
The government of Japan is going to introduce stricter legal requirements regarding crypto transactions. The most important regulatory change will be the addition of the FATF Travel Rule.
The amendment was agreed upon after a thorough review of relevant laws from December 2022, which the Financial Action Task Force (FATF) found to be insufficient. In order to comply with global regulations, Japan would now require financial institutions to provide detailed information about their customers’ transactions, including their registered personal data such as names and addresses.
The new AML rules are part of the country’s ongoing efforts to fight money laundering in the crypto sector and create greater transparency in cryptocurrency transactions.
In general, Japan’s measures to combat money laundering and terrorist financing have strengthened throughout the last few years. The country is fully compliant on 4 FATF Recommendations and largely compliant on 25. However, it remains only partially compliant with 9 more Recommendations.
The Travel Rule, also known as the FATF Recommendation #16, obliges virtual asset service providers (VASPs) to report details of all user transactions exceeding the amount of USD 1,000. The Rule was adopted by many countries as a part of their enhanced crypto regulation programs e.g. MiCA in the EU. However, the minimum limit of reported transactions may vary from country to country depending on local regulations.
The FATF Travel Rule is somewhat controversial as it requires exposing user data to centralised governmental institutions. That is why many governments are exploring viable security measures to supplement the strict reporting and protect those who use cryptocurrencies on a daily basis for completely legal activities.