Japan Cracks Crypto Whip, Implements Strict Travel Rule To Combat Money Laundering

Japan is adopting enhanced measures to combat money laundering, notably, the "travel rule" advocated by the Financial Action Task Force (FATF).

The regulation mandates Virtual Asset Service Providers, or VASPs, to share identifying details about the sender and recipient for all crypto transactions over the value of $1,000.

FATF, a watchdog for financial crimes, made the recommendation to bolster the fight against illicit financial activities, particularly those utilizing cryptocurrency.

Back in 2019, FATF suggested the implementation of the travel rule as a crucial tool in the battle against money laundering and terrorist financing via crypto transactions.

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Earlier this month, the travel rule found strong backing from the Group of Seven (G-7), an intergovernmental political organization. It supported FATF's efforts to expedite the global application of this rule, which calls for sharing information about crypto fund transfers among financial institutions.

Japan’s Financial Services Agency (FSA) has also encouraged providers of virtual asset services to comply with the rule.

The move demonstrates Japan's commitment to strengthening its financial regulations. However, the introduction of the travel rule has posed challenges to the country's burgeoning crypto industry.

The country's Virtual Currency Exchange Association (JVCEA) responded in April 2022 with the introduction of self-regulatory rules aligning with this requirement.

Later in October, the Japanese government sanctioned a cabinet decision to modify existing laws, with the aim of minimizing money laundering activities involving cryptocurrencies, thereby adhering to FATF guidelines.

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