Japan’s financial regulator has told crypto firms to end their Russian relationships in order to conform to international sanctions following pressure from the US.
US diplomats have called on Japan’s 31 locally licensed crypto exchanges to cut off services to Russian users. Citing persons familiar with the matter, Financial Times (FT) says that US diplomats also asked the country to cease its Siberian crypto mining operations.
In Siberia, the Irkutsk region is still attractive to crypto miners whose power-hungry machines fare well with the cold weather and a cheap supply of hydropower energy.
In March, following a change to the country’s law, Japan’s Financial Services Agency (FSA) told crypto exchanges to keep a close eye on transactions linked to people subject to sanctions.
Japan’s Foreign Exchange and Foreign Trade Act was adjusted to bring cryptocurrencies and other digital assets under the FSA’s jurisdiction. However, the regulator’s warning did not directly ask the exchanges to terminate any Russian accounts.
Instead, they should:
- Block transactions of crypto-assets if the recipient or sender is subject to or suspected of sanctions or is required to gain permission from the government beforehand.
- Report all transfers to the FSA and Ministry of Finance (MoF) if it discovers a sanction-breaking user.
- Increase monitoring to make discovering the above easier.
Sanction-breaking crypto traders found flouting the law “shall be punished by imprisonment with work for not more than three years or a fine of not more than one million yen ($7,350), or both; provided that three times the price of the subject matter of the violation exceeds one million yen ($7,350), a fine shall be not more than three times the price,” the government said.
Despite this, many exchanges and mining operations still run within the country through a complex network of subsidiaries, reports FT. However, crypto exchange DeCurret has ceased facilities for Russian users following the FSA’s notice.
Japan has been working with the US to curb crypto tied to Russia
Pursuant to March’s announcement, Chief Cabinet Secretary Hirokazu Matsuno said that the new rules would “[enable] the government to apply the law to crypto-asset exchanges like banks and oblige them to scrutinise whether their clients are Russian sanction targets.”
In January, after a meeting at the White House, Prime Minister Fumio Kashida preempted aggression from Russia. The head of Japan recognized the “importance of close cooperation among the United States […] and the Republic of Korea in addressing common challenges,” according to a White House release.
The concerns were later reiterated at the G7, when Bank of Japan official Kazushige Kamiyama said that crypto regulation was a priority before it “upend[ed]” the global settlement system.