Japan will toughen regulations on cryptocurrency exchanges, requiring them to check whether recipients of transactions are subject to financial sanctions imposed following Russia's invasion of Ukraine, government sources said Wednesday.
The move, which will be part of the envisaged amendment of the foreign exchange and trade law, is aimed at preventing cryptocurrencies from being a loophole to sidestep such sanctions, the sources said.
Concerns have been growing that cryptocurrencies may be used to water down some sanctions against Russia after the country was excluded from a key international payment network known as SWIFT.
Under the revised bill, the government also plans to restrict those sanctioned from transferring crypto assets to an account of a third party.
Prime Minister Fumio Kishida said Monday that the government will prepare for the amendment in the current parliament session through mid-June.
Under the current law, banks are obliged to check whether the recipients of money transfers are targeted by the sanctions, while crypto exchanges are not.
The government asked the crypto exchanges earlier this month to step up their monitoring of crypto assets and report to financial authorities any suspicious transactions that may involve those who are subject to the sanctions.