Cryptocurrency exchange platforms that are active in the island country of Japan aim to stagnate the execution of the new regulation levied by the country’s regulator that requires them to publicize transaction details that have reached a specified threshold.
The regulation, coined as The Travel Rule, was first initiated by Japan’s financial Service agency (FSA) in March this year. It follows the FATF’s recommendation and generalized guidelines regarding virtual assets service providers.
As the stipulated deadline approaches, Japan’s cryptocurrency exchange platforms have revealed that they are in serious negotiations with its FSA. They aim to lower the scope of the regulation to accommodate only primary cryptocurrency tokens.
To comply with FATF’s compliance directives, it has announced that it will work in hand with Japan’s Virtual Assets and Crypto Assets Exchange Association (JVCEA .) to introduce the nation’s regulations targeted at compliance in the cryptocurrency industry by 2022.
The Exchanges’ Reaction
With the new regulation mandating Crypto services firms in Japan to share legible user information amongst themselves, but not necessarily with the regulator, the service providers have voiced their complaints about the choked timeline.
According to different reps of the service providers in the country, they acknowledge that the move by the nation’s FSA. only brings merits and offers minor demerits. The open and transparent availability of user info in the hub will allow for easy flagging of nefarious transactions linked to money laundering and terrorist funding.
Although these VASPs have acknowledged the significance of this regulation, they ultimately have to consider their interests. They have shown concerns about the deadline, unanimously claiming it is difficult to pass.
“We have to overhaul our systems radically,” the Vice CEO of the JVCEA, Genki Oda, announced in a press conference. Takeshi Chino, managing director of crypto exchange Kraken Japan, said and is quoted, “ The Timeline is quite tight.”
Representing the nation’s VASPs, Chino said that he couldn’t verify the possibility of all crypto service providers’ compliance if the Travel rule is enforced on all asset classes, including minor tokens.
Further revelation from the country’s regulator has revealed a possibility of it caving and giving in to some of the exchanges’ demands, especially the scope limitation of the travel rule.
FATF’s Guideline Relative To Japan
The Financial Action Task Force is an international regulatory body that comprises 39 different countries globally. It issues guidelines on anti-money laundry regulations and keeps a watchlist of compliant countries and those that aren’t. The body lacks prosecutive abilities, but it maintains a blocklist, and countries on the blocklist can be sanctioned at any time by other FATF countries.
In March, the task force had released guidelines that nations globally can reference to combat Virtual Assets. The task force has lumped cryptocurrency and its derivatives services under this general classification. Since then, there has been global backlash from the crypto community as members claim that such generalization does not do justice to the industry’s already developed framework.
The FATF revealed its discovery to Japan when it told the country that it lacked crucial anti-money laundering and combating terrorism guidelines in its national and financial regulatory framework. The report came in August, earlier this year.
The task force further revealed that the country’s criminal syndicates have now turned their attention to using virtual assets to clean their funds, indicating that the service providers were negligent of these activities under their noses.
After receiving the FATF’s warnings, Japan has enforced mandatory regulation through its FSA, one that requires exchanges operating in the country to integrate a tracking feature in their various frameworks. The tracking feature must be able to raise red flags on noticing suspicious transactions.