Japan amends law to stop Russia exploiting ‘crypto-loopholes’
Japan will revise changes to the economic sanctions levied on Russia following Moscow’s invasion of Ukraine. Of late, several reports have alluded to Russia’s efforts to evade the sanctions using crypto-assets. Japan is the latest to amend its foreign exchange laws to avoid this, something confirmed by top government officials.
The government will submit a revision of the Foreign Exchange and Foreign Trade Act before the parliament to strengthen protections against potential sanction-busting by Russia through digital assets. This was announced by Chief Cabinet Secretary Hirokazu Matsuno in a press conference.
The revised law “presumably enables the government to apply the law to crypto-asset exchanges like banks and oblige them to scrutinise whether their clients are Russian sanction targets,” said Saisuke Sakai, Senior Economist at Mizuho Research and Technologies to by Yahoo Finance.
In recent years, Russia has been an important trade partner for Japan. However, Tokyo has been a vocal critic of the invasion of Ukraine. Hence, a decision was made for freezing assets of more than 100 Russian officials, oligarchs, banks and other institutions.
What motivated the changes?
Reports have been flooding in from senior lawmakers about Russia’s intentions to strategically evade the economic sanctions using crypto-assets. Arcane Research, for instance, claimed that there has been a major uptick in rouble-crypto transactions. The report stated,
“On February 28th, we saw a massive volume increase in the rouble pairs on Binance, particularly in USDT, as the USDTRUB volume reached a new all-time high of $35 million. The bitcoin volume also saw a substantial rise.”
Marcus Ferber, a German member of the European Parliament, was among those who voiced his concerns by saying,
“The European Commission must come up with specific proposals on how to close any loopholes in the sanctions regime relating to crypto assets.”
European Central Bank chief Christine Lagarde also chipped in by stating,
“To circumvent the sanctions that have been decided by many countries around the world against Russia and a particular and specific number of players,” Lagarde told an online banking forum. Here in Europe, we have taken steps to clearly signal to all those who are exchanging, transacting, offering services in relation to crypto assets that they are being accomplices.”
What else is being done to counter-Russia?
The United States has launched a task force called “KleptoCapture” to ensure the sanctions on Moscow while keeping cryptocurrencies at the centre of their focus. Similarly, the EU has also revised its strategy. This was evident in French Finance Minister Bruno le Maire’s statement.
“We are taking measures, in particular on crypto currencies or crypto assets which should not be used to circumvent the financial sanctions decided upon by the 27 EU countries.”
It remains to be seen how Russia will cope with the regulations on crypto.