On Monday, Japanese authorities directed cryptocurrency exchanges not to conduct transactions involving crypto-assets subject to asset-freeze penalties imposed on Russia and Belarus as a result of the Ukraine conflict.
The action was made in response to a Group of Seven (G7) statement issued on Friday, which said “Western nations will impose costs on illicit Russian actors using digital assets to enhance and transfer their wealth.”
G7 advanced economies are increasingly concerned that Russian firms are using cryptocurrency to circumvent financial restrictions imposed on the country for invading Ukraine.
On Friday, the US Treasury Department published new instructions requiring US-based cryptocurrency firms not to engage in transactions with sanction targets.
“We decided to make an announcement to keep the G7 momentum alive,” said a senior official at Japan’s Financial Services Agency. “The sooner the better.”
The Japanese government will increase measures to prevent cash from being transferred via crypto assets, which would breach penalties, according to a joint statement issued by the FSA and the Ministry of Finance.
Japan has lagged behind a global shift among financial authorities in enacting stronger restrictions on private digital currencies, despite the fact that the G7 affluent nations and the Group of 20 powerhouses have all urged for stricter regulation of “stablecoins.”
Unauthorized payments to sanctioned targets, including through crypto assets, are punishable by up to three years in prison or a 1 million yen ($8,487.52) fine, according to the FSA on Monday.
According to an industry association, there were 31 crypto exchanges in Japan as of March 4.
Given the new market’s prominence, global regulators are concerned about its safety for investors. The possibility of market manipulation was stated by the Securities and Exchange Commission as one of the key grounds for rejecting multiple applications for spot bitcoin exchange-traded funds.