Japan’s government is set to tighten its foreign exchange legislation to prevent Russia leveraging cryptocurrencies to evade sanctions, reports Reuters.
During a Monday press conference, Chief Cabinet Secretary Hirokazu Matsuno said proposed amendments to the Foreign Exchange and Foreign Trade Act will seek to keep sanction targets out of the crypto ecosystem.
“[The revision] presumably enables the government to apply the law to crypto asset exchanges like banks and oblige them to scrutinise whether their clients are Russian sanction targets,” said Saisuke Sakai, senior economist at Mizuho Research and Technologies (via Reuters).
The amended act is expected to be submitted to the current parliament session, which will end in June. A finance ministry official confirmed that discussions were ongoing but didn’t provide further information, according to Reuters.
Also on Monday, Prime Minister Fumio Kishida told the coalition parliament that Japan needed to be in lockstep with the West in applying sanctions on Russia as its Ukraine invasion moves into its second month.
Indeed, Japan joined the US in calling on crypto exchanges to block transactions to sanctioned Russian and Belarusian individuals following a G7 summit earlier this month.
The threat of three years’ jail or a $1 million fine now lingers over Japan’s 31 crypto exchanges should any process transactions to sanction targets.
As Bloomberg notes, Kishida’s approval rating jumped six points to 61% as a result of swift asset freezes on more than 100 Russian individuals and entities.
In the US, crypto exchanges like Coinbase and Kraken have avoided imposing such a ban until the White House forces their hand.
Japan’s crypto sanctions don’t really threaten Russia
Russia has placed Japan on its list of “unfriendly nations” in response to its strict sanction policies.
Last week, Russian President Vladimir Putin demanded that unfriendly countries pay for gas in roubles in a bid to boost its struggling currency.
Japan accounted for around 7% of Russia’s natural gas exports in 2021.
“Currently, we’re looking into the situation with relevant ministries as we don’t quite understand what is [Russia’s] intention and how they would do this,” finance minister Shunichi Suzuki told parliament (via Al Jazeera).
As for so-called “friendly countries” like Turkey and China, Putin said they could choose between either roubles their own currency.
Top energy official Pavel Zavalny also hinted that the country was open to remittance via Bitcoin, although the proposal appeared hypothetical rather than a concrete offer.
In any case, blockchain analytics firms Chainalisys and Elliptic have suggested that imposing crypto sanctions won’t deliver a meaningful blow to the finances of Putin supporters.
Elliptic claims to have identified hundreds of thousands of crypto addresses linked to sanctioned Russian officials and oligarchs.
While those wallets hold millions in cryptocurrency, the London-headquartered firm said the digital asset ecosystem lacks the liquidity to shoulder the weight of the Russian economy.
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