Japan Orders Crypto Exchanges to Comply with Sanctions against Russia

Key Insights:

• The Japanese government and the regulator have asked crypto exchanges to act according to sanctions against Russia.
• The G7 joint recently implemented fresh crypto sanctions on Russia.
• Japan will impose penalties if crypto exchanges fail to comply with sanction rules.

Japanese authorities have ordered crypto exchanges not to process any crypto transactions with Russian and Belarusian accounts following international sanctions.

Per the order released Monday, the FSA and the Ministry of Finance jointly said it would strengthen measures against illicit and unauthorized crypto transfers that violate the sanctions.

Japan has reacted swiftly to the recent G7 joint statement that came up with new sanctions against Russia, focusing on crypto. Regulators from the G7 economies are concerned about cryptocurrencies being used by Russian individuals, elite class, businesses, and firms to evade financial sanctions.

According to a Reuters report, a senior official from Japan’s FSA said,

“We decided to make an announcement to keep the G7 momentum alive. The sooner the better.”

Strict Penalty if Breached

Furthermore, Japan’s FSA and the Ministry of Finance have stated that crypto exchanges that fail to comply with Russian sanctions will be subject to three years in prison or a penalty of 1 million yen ($8,487.52).

The FSA said that crypto exchanges must report to the authorities in case of any unauthorized crypto transactions detected from sanctioned users, Forkast news reported.

According to an industry association, there are 30 registered crypto exchanges currently in Japan. The government’s call to all 30 exchanges targets Japan’s latest sanctions list involving 44 Russian individuals, including President Vladimir Putin and ten organizations.

Alongside, Japan’s orders also apply to 19 Belarussians, including President Alexander Lukashenko, who has been an ally to Moscow’s aggression, and 15 groups.

How Can Russians Use Crypto To Escape Sanctions?

Although global regulators and governments are taking massive steps to seal all prospects of Russians using cryptos to evade sanctions, there still are other ways that can be used.

One such prominent way is the use of ransomware by Russians, which is already well established in the country. Around 74% of the world’s total ransomware – over $400 million worth of cryptocurrency – was linked to Russian sources in 2021, Chainalysis data revealed.

Another option through which Russia could use cryptos is Bitcoin mining. In a recent meeting, President Putin said that Russia has a “competitive advantage” in crypto mining, given the surplus amount of electricity along with trained miners.

By clamping down crypto exchanges, the regulators are trying to trim down exchanges that were complicit in enabling Russia-based criminals to launder large amounts of money.