Japan Amended KYC Rules to Combat Money Laundering

• A legal framework governing cryptocurrencies was first adopted in Japan.
• After Terra Luna collapsed in 2022, a bill was passed allowing licensed banks to use stablecoins.

The Japanese government endorsed a cabinet decision to revise six laws related to the Foreign Exchange Act to resist money laundering. The bill tightens Know-Your-Customer (KYC) criteria for crypto exchanges and firms. It also broadens money laundering penalties, as well as the bill. Which has submitted to the National Diet Session for approval. According to a local news report.

Japan’s Crypto Regulations

Since September 2010, the Japanese government has intended to implement the Financial Action Task Force’s anti-money-laundering standards, while local cryptocurrency exchanges have fought to limit the rules’ scope, citing compliance burdens and costs. 

In 2016, Japan became the first country to implement a legal framework governing cryptocurrencies. By including specific rules in its Payment Services Act. Following major hacks in cryptocurrency firms, the rules have tightened. And made crypto assets like Bitcoin legal tender. In addition, following the Terra Luna collapse in 2022, a bill was passed allowing licensed banks to adopt stablecoins.

Furthermore, the new security measures have yet to detailed, and the country intends to give itself the authority to freeze the assets of individuals and institutions involved in money laundering crimes. And major regional exchange firms CoinCheck and GMO Coin have responded besides fixing the rules.

Firms relocate to crypto-friendly countries as a result of the rules update on the status. Rakuten Group President Hiroshi Mikitani self-criticized and said the rules were too rigid to allow crypto to flourish in 2022, resulting in rapid firm shrinkage.

 Hiroshi Mikitani stated that 

Most people go to Singapore because its stupid to start a business in Japan

Following this incident, Japan’s Prime Minister, Fumio Kishida, declared that 2022 would be the first year of creating start-ups and that the government may lower crypto tax rates to encourage crypto start-ups to establish businesses in Japan. 

Japan currently taxes corporate investors 30% and individual investors up to 55% on all realized and unrealized crypto gains. The government did not specify how much these tax rates would be reduced.