Amid G7 discussions among global leaders at Hiroshima in Japan, the host country’s cabinet recently aimed to strengthen the cryptocurrency laws to eliminate the issues arising due to money laundering. The cabinet planned to implement the measures from 1 June 2023. It is crucial to note that Japan, in December 2022 amended relevant laws regarding anti-money laundering as it was considered insufficient by the Financial Action Task Force (FATF).
The new measures reflect a growing focus on monitoring crypto assets that can be exploited for money laundering, where illicit funds are disguised as legitimate by routing them through legal transactions. One key aspect of the new regulatory framework is the implementation of the “travel rule,” designed to improve the traceability of criminal proceeds. Under this rule, financial institutions facilitating crypto transfers are required to share customer information with the recipient institution.
Japan is one of the few countries in the world that has taken a proactive approach to regulating cryptocurrencies. In April 2017, the Payment Services Act (PSA) recognized Bitcoin and other virtual assets as legitimate property. Since then, the country has been at the forefront of cryptocurrency regulation, implementing several updates and amendments to its existing regulatory framework.
Under the PSA, cryptocurrency exchanges in Japan are required to register with the Financial Services Agency (FSA) and follow traditional AML/CFT responsibilities. This legislation has helped to ensure that crypto exchanges in Japan operate transparently and securely, providing greater protection to investors.
One of the most significant changes in Japan’s regulatory environment was made in May 2020 when amendments to the PSA and the Financial Instruments and Exchange Act (FIEA) were introduced. These revisions replaced the term “virtual currency” with “crypto-asset,” which brought greater clarity to the regulation of cryptocurrency exchanges and trading platforms.
It is crucial to note, Japan understands that the crypto ecosystem has the potential to generate significant economic value, particularly in the cultural and economic areas where the country has strength. It expects that the use of tokens such as NFTs and fan tokens enables securing additional revenue sources for IP holders, creators, and other stakeholders, retention of loyal fans, and in turn, revitalization of industries in the cultural and economic areas.
Japan is also considering it important to establish an environment where Japan has strength. Furthermore, the metaverse has now made possible the distribution of intangible objects whose value was difficult to determine. Thus, the form and means of distribution of value have been changing. It is expected that, through such developments, communities that have been increasingly divided along with the development of information and communication technologies are to be connected soon and create new value, once again. Ultimately, there is the possibility that in the future the concepts of individual free will change, as seen in cases where a person may use multiple bodies or multiple persons may share one body; under such circumstances, value, ownership, and transactions may be redefined.