Japan urges crypto firms to comply with sanctions against Russia

A man stands near an advertisement for a cryptocurrency exchange in Tokyo, Japan, March 30, 2018. REUTERS/Toru Hanai/Files

TOKYO, March 14 (Reuters) - Japanese authorities on Monday ordered cryptocurrency exchanges not to process transactions involving crypto assets subject to asset-freezing sanctions against Russia and Belarus over the war in Ukraine.

The move followed a Group of Seven (G7) statement on Friday that said Western nations "will impose costs on illicit Russian actors who use digital assets to enhance and transfer their wealth." Read more

There is growing concern among the G7 advanced economies that Russian entities are using cryptocurrencies as a loophole for financial sanctions placed on the country for invading Ukraine.

The US Department of the Treasury issued new guidance on Friday that required US-based crypto firms not to engage in transactions for sanction purposes. Read more

"We decided to make an announcement to keep the momentum of the G7 alive," said a senior official at the Japan Financial Services Agency. "The sooner the better."

The Japanese government will strengthen measures against the transfer of funds using crypto assets that would violate sanctions, the FSA and the Ministry of Finance said in a joint statement.

Japan has delayed a global shift among financial regulators by setting tighter rules on private digital currencies, while wealthy G7 powers and Group of 20 powers have called for more regulation of "stablecoins."

Unauthorized payments to targets under sanctions, including through crypto assets, are subject to a penalty of up to three years in prison or a fine of 1 million yen ($8,487.52), the FSA said Monday.

There were 31 crypto exchanges in Japan as of March 4, according to an industry association.

Global regulators remain concerned about the safety of the new market for investors, given its rise in popularity. The US Securities and Exchange Commission has cited the potential for market manipulation as one of the main reasons for rejecting several applications for bitcoin spot exchange-traded funds.

($1 = 117.8200 yen)

Reporting by Tetsushi Kajimoto, Daniel Leussink, and Kantaro Komiya; Edited by Jacqueline Wong and Sam Holmes

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