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Crypto exchanges operating in Japan need to comply with sanctions against Russia for its invasion of Ukraine. Japanese authorities warned the companies could face penalties if they fail to do so.
On Monday, Japanese authorities ordered crypto exchanges not to process transactions involving crypto assets that are subject to the sanctions against Russia and Belarus, Reuters reported. The order arrived after the G7 stated on Friday that Western nations “will impose costs on illicit Russian actors using digital assets to enhance and transfer their wealth.”
There were concerns that Russia could employ crypto in its attempt to evade the sanctions, which resulted to regulators specifically including crypto assets in their sanctions. For instance, The U.S. Treasury Department issued new guidance last Friday instructing U.S.-based crypto firms not to engage in transactions with those included in the sanction list.
“We decided to make an announcement to keep the G7 momentum alive,” a senior official at Japan's Financial Services Agency (FSA), said. “The sooner the better.”
On Monday, Japan’s Ministry of Finance and the FSA jointly announced penalties on crypto platforms that fail to comply with sanctions against Russia. These could include a fine of up to a million yen and jail time for their executives.
“Cryptocurrency exchanges that make any unauthorized payments including cryptocurrencies to sanctioned targets could face up to three years in prison or a fine of 1 million yen ($8,487.52),” a report by Forkast said. The FSA also requires crypto exchanges to report any suspected transfers from the sanction targets.
Aside from Japan-based crypto exchanges, major South Korean crypto exchanges have also joined Western sanctions. Gopax, Upbit, Bithumb, Coinone, and Korbit have already targeted Russian IP addresses to place restrictions on Russian users on their platforms.
“We’ve blocked subscriptions by users in countries which are at high risks of money laundering, in line with the guidelines of the Financial Action Task Force,” the crypto exchange Upbit confirmed. The crypto firm added that it would reject withdrawal requests related to Russia.
However, not everyone is on board with the West’s decision to include crypto assets in the sanctions. For example, Coinbase, Binance, and Kraken said that they will not place restrictions on all Russian addresses.
“We are not going to unilaterally freeze millions of innocent users’ accounts,” a Binance spokesperson explained. “Crypto is meant to provide greater financial freedom for people across the globe. To unilaterally decide to ban people’s access to their crypto would fly in the face of the reason why crypto exists.”
