Following Western Sanctions Directions, Japan Also Bans Crypto Money Transactions Involving Russia

Japan begins to ban cryptocurrency transactions involving Russia. (photo; doc. pixabay)

JAKARTA - Authorities in Japan have ordered crypto exchanges in the country, on Monday, March 14 not to process transactions involving crypto assets that are subject to asset freeze sanctions against Russia and Belarus over the war in Ukraine.

The move follows a statement by the Group of Seven (G7) on Friday March 11 that said Western countries "will impose fees on illegal Russian actors who use digital assets to increase and transfer their wealth."

There is a growing concern among the G7 developed countries that cryptocurrencies are being used by Russian entities as a loophole to overcome financial sanctions imposed on the country for invading Ukraine.

The US Treasury Department issued new guidance on Friday, March 11, requiring US-based cryptocurrency companies not to engage in transactions with sanctions targets, such as Russia.

"We decided to make an announcement to keep the momentum of the G7 alive," said a senior official at Japan's Financial Services Agency, as quoted by Reuters. "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 lagged in the global shift among financial regulators in setting stricter rules on private digital currencies. Meanwhile the G7 rich powers and Group 20 member nations have all called for greater "stablecoin" regulation.

Unauthorized payments to targets under sanctions, including through crypto assets, are punishable by up to three years in prison or a fine of 1 million yen ($1,500), the FSA said on Monday, March 14.

According to a cryptocurrency industry association in Japan, there are now 31 cryptocurrency exchanges in the country as of March 4.

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