Starting from June 1, lawmakers in Japan have decided to enforce stricter Anti-Money Laundering (AML) measures to enhance the tracing of cryptocurrency transactions. The decision was made by the Japanese parliament on May 23, aiming to align the country's legal framework with global crypto regulations.
The revision of the AML legislation comes after it was deemed insufficient by the Financial Action Task Force (FATF), an international financial watchdog. The new measures introduce several key changes, with the enforcement of the "Travel Rule" being a crucial component.
The Travel Rule requires financial institutions handling cryptocurrency transfers exceeding $3,000 to share customer information with the receiving exchange or institution. This information includes the name and address of the sender and recipient, as well as account details. By implementing this rule, authorities aim to maintain a more accurate record of potential criminal proceeds.
The Travel Rule was a topic of discussion among global leaders during the G7 meeting held in Japan in mid-May. The G7 Committee expressed clear support for the Travel Rule regarding crypto transactions, endorsing the FATF's efforts to establish global standards and address emerging risks associated with decentralized finance arrangements and peer-to-peer transactions.
Japan has been an early adopter of cryptocurrencies, legalizing them as a form of property. The country's crypto regulations are among the most stringent worldwide. Following major exchange hacks, such as Mt.Gox and Coincheck, Japan's financial regulator, the Financial Services Agency (FSA), tightened rules for crypto exchanges. These rules include separate holdings of customer and company assets, annual audits to verify holdings, limitations on leveraged trades, and the requirement for licensed exchanges to store at least 95% of customer funds in cold wallets.
In April, the Web3 project team of Japan's ruling Liberal Democratic Party released a white paper proposing strategies to expand the country's crypto industry, showcasing ongoing efforts to foster the growth and development of the digital asset sector in Japan.