Japanese authorities ordered crypto exchanges not to process transactions involving crypto assets subject to asset freeze sanctions against Russia and Belarus over the war in Ukraine.
The move came after a statement by the G7 group on Friday that said Western countries would impose fees on illegal Russian actors who use digital assets to increase and transfer their wealth.
There is a growing concern among the G7 developed countries that cryptocurrencies are being used by Russian entities as a loophole for financial sanctions imposed on the country for invading Ukraine.
The US Treasury Department issued new guidance on Friday requiring US-based cryptocurrency companies not to engage in transactions with sanctions targets.
"We decided to make an announcement to keep the G7 momentum alive," said a senior official at Japan's Financial Services Agency. "The sooner the better."
The FSA and the Ministry of Finance said in a joint statement that the Japanese government would strengthen measures against the transfer of funds using crypto assets that would violate sanctions.
Japan has lagged in a global shift among financial regulators in setting stricter rules on private digital currencies, while the G7 rich powerhouse and Group 20 powerhouse have all called for greater "stablecoin" regulation.
Unauthorized payments to targets under sanctions, including through crypto assets, are punishable by up to three years in prison or a fine of 1 million yen ($8,487.52), the FSA said on Monday.
There were 31 crypto exchanges in Japan as of March 4, according to an industry association.
Global regulators remain concerned about the safety of the new market for investors, given its surge in popularity. The US Securities and Exchange Commission has cited potential market manipulation as one of the main reasons for rejecting some applications for funds traded on spot bitcoin exchanges.
Note: ($1 = 117,8200 yen)
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