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If Japan amends FEFTA for crypto regulation, it would become difficult for countries like Russia to evade levied sanctions.
Japan is set to revise its crypto regulation legislation to enforce compliance with sanctioned countries. The East Asian nation wants to amend its Foreign Exchange and Foreign Trade Act (FEFTA), an act that already governs banks. By adding digital currencies, sanctioned countries like Russia would have a harder time evading economic sanctions using crypto. Under the new foreign exchange laws, crypto exchanges must comply with verifying and flagging suspect transactions, especially those linked with sanctioned Russian individuals or groups.
Japanese Chief Cabinet Secretary Hirokazu Matsuno revealed this during an address at a press conference. According to Matsuno, the government of Japan is already in the process of submitting the FEFTA bill to parliament.
Saisuke Sakai, a senior economist at Mizuho Research and Technologies, also weighed in on the proposed revised bill, explaining that it:
“…presumably enables the government to apply the law to crypto-asset exchanges like banks and oblige them to scrutinize whether their clients are Russian sanction targets.”
Meanwhile, newly elected Japanese Prime Minister, Fumio Kishida, also supports the proposed revision. Kishida also implored all the country’s Western allies to facilitate the enforcement of the new laws.
Japan Has Been Progressively Tightening Crypto Regulation to Halt Sanction Evasion for a while Now
The proposed revision would not be the first time that Japan would look into cracking down on crypto to block a loophole usable by Russians. Early in the month, the Japanese Financial Services Agency and the Japan Virtual and Crypto Assets Exchange Association ran an assessment. Both parastatals examined plausible evasive tactics Russia may deploy, and how to block said tactics or transactions. Also, at the time, Japan’s Finance Minister Shunichi Suzuki explained that his country was closely observing the situation.
Russia has opted for alternative payment systems and methods of accessing the international trade market. The country decided to do this following financial sanctions from the West. For instance, Russia switched to China’s Unionpay after Visa and Mastercard both suspended operations in the country.
Russia Using Crypto as Leverage for Ransomware
Concerns from the West that Russia could evade sanctions using digital currencies are ever-present, considering that the Eastern European powerhouse has taken a particular growing interest in the crypto marketplace. Furthermore, recent comments made by Russian ministers suggest an inkling toward cryptocurrencies.
Currently, there is little proof that Russia could use crypto to undermine all the sanctions imposed against it. However, there are still several other ways that Russian entities could use digital currencies to offset specific sanctions. For instance, ransomware is a possible tool. The ransomware industry enriched Russian-linked criminals more than any other group in 2021. Recently, former FBI agent and current Director of Threat Intelligence at Abnormal Security Crane Hassold shed some light on ransomware. According to him, digital currencies are the main facilitator of the current ransomware industry.