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Japan Crypto Regulator States Easing of Restrictions Must Wait

Richard Marley
August 10, 2021
2 minutes read
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The Japanese financial regulator FSA is reluctant about easing regulatory requirements for the crypto industry given the increasing financial crime

The Financial Supervisory Authority (FSA) emphasised that cryptocurrency investing in Japan needs to be much more viable and streamlined as per state-of-the-art regulations.

Junichi Nakajima, the commissioner of FSA, in a statement mentioned that although he is open to potential benefits of digital assets like Bitcoin, he believes that they are still mostly used for speculation even though they are a quick means to send cash anywhere and anytime.

He further added that crypto transactions are used either to transfer money or to make investments. There is a wide array of challenges emerging from various businesses turning towards decentralised finance, better known as DeFi. He quotes,

“We need to consider carefully whether it is necessary to make it easier for the general public to invest in crypto assets”

When compared with the US where investors have numerous ways to invest in digital assets, investors in Japan face certain state restrictions. In this regard, the FSA has formulated a group of external officials who will carry out a study related to regulatory responses to decentralised finance. Nakajima is also looking to understand how investors perceive the crypto industry despite the regulations.

In 2017, he initiated the first-ever crypto regulatory framework for Japan comprising a registration requirement for virtual asset service providers (VASPs) and crypto exchanges. The massive data breach in 2018 at Coincheck, the Tokyo-based digital asset provider, led to stringent regulations after FSA determined a lack of customer security practices and internal controls.

Nakajima stated that the present crypto framework has been effective in ensuring anti-money laundering (AML) compliance and customer data and privacy protection, however, many among the 31 registered exchanges are facing challenges and the situation is “rather difficult”.

The fact that crypto does not comprise any underlying assets as financial stocks do makes them highly volatile, which is why the Japanese watchdog is reluctant about legalising crypto investment trusts.

Disclaimer: No warranty is herein provided that the information contained in this document is accurate, up-to-date, and/or complete. In no circumstance(s), does such information constitute legal or any other advice. Any person who intends to use, rely, pass-on, or re-publish the information contained herein in any way is solely responsible for the same. We suggest to verify the information and/or obtain expert advice independently if required.

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UK Publishes First National Risk Assessment of Proliferation Financing
The UK is at a high risk of proliferation financing for Korea and Iran, while UK financial institutions remain the main target.

The UK has published its first national risk assessment (NRA) of proliferation financing risks, following the collection of views and evidence from the government, private sector, and academic and research partners, highlighting the proliferation financing risks facing the UK.

The UK is one of the first jurisdictions to carry out such an assessment.

While the UK currently has robust practices in place for combating proliferation financing activities, malign actors involved in proliferation financing seek to exploit the UK’s stability in the global economy and international financial system. The act involves the use of funds for facilitating chemical, biological, radiological, and nuclear (CBRN) programmes which pose a threat to the UK’s national security objectives and threaten international peace.

The key findings of the proliferation financing NRA have been identified as the following:

The UK’s financial sector is at high risk from proliferation actors. The UK’s financial services industry, particularly the banking and insurance sectors, is especially at risk

The Democratic People’s Republic of Korea (DPRK) and Iran are the most significant proliferation financing actors at the state level

The private sector has limited awareness regarding proliferation financing compared to other risks, such as money laundering and terrorist financing

The notice issued by the UK government states that “a lack of awareness of proliferation financing in parts of the UK economy can lead to a lack of understanding of how certain industrial products, for example, may be manipulated for hostile use or for use in a CBRN programme”.

Despite the above-mentioned threats, the NRA highlights the robust counter-proliferation legal framework in place in the UK that protects the country from proliferation financing.

The UK’s autonomous financial sanctions regimes targeting CBRN proliferation, as well as other regulations in the UK, including UN sanctions regimes, export control regimes, and other tools available to the UK Government, limit opportunities for proliferating actors to exploit the UK to obtain financing for CBRN capabilities.

The full assessment can be viewed here.

Suggested Read: FATF Issues New Guidance on Mitigating Proliferation Financing Risk

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Acquire registries of the company to get updated information on the beneficial ownership of the company (the Registry Approach)

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Conducting ongoing monitoring of the corporate entity and maintaining updated risk profiles of the business entities is important

Transactions must be regularly scrutinized throughout the business relationship to make sure transactions are consistently conducted

Transaction monitoring must also verify the source of funds and the region they are being transferred to/from

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Corporate Transparency Act in the US

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FinCrime through shell companies and imposters has been a problem for the corporate sector for years. Money launderers that pretend to be potential investors and shell companies approaching with fascinating partnership opportunities has become the oldest trick in the book. Unfortunately, many companies still fall prey to these activities, resulting in hefty financial losses, exposure of confidential data, and a damaged brand reputation. With numerous laws in place to combat money laundering and terror financing, there must be an adequate solution in place for screening every entity before developing any business relationships. Shufti Pro’s AI-backed business verification is what every firm needs at the moment. It will not only help you screen partners and intermediaries, but also assist you in staying compliant with the rigid KYB regulations.

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Japan Crypto Regulator States Easing of Restrictions Must Wait

Regulatory Approach to Merchant Onboarding

FATF’s Recommendations

6AMLD in the EU

Corporate Transparency Act in the US

How Shufti Pro is Helping Businesses Onboard Legitimate Merchants

In a Nutshell…

Let’s prove your

customer’s identity

with Shuftipro.

Let’s prove your customer’s

identity with Shuftipro.

Japan Crypto Regulator States Easing of Restrictions Must Wait

What is Merchant Verification?

Regulatory Approach to Merchant Onboarding

FATF’s Recommendations

6AMLD in the EU

Corporate Transparency Act in the US

How Shufti Pro is Helping Businesses Onboard Legitimate Merchants

In a Nutshell…

Let’s prove your

customer’s identity

with Shuftipro.

Let’s prove your customer’s

identity with Shuftipro.