Japan Prepares FEFTA Amendment to Prevent Russia From Using Crypto Loopholes

In a bid to strengthen financial sanctions imposed on Russia by Western countries, Japan is amending its foreign exchange law to remove the loopholes that can be used by sanctioned Russians for crypto transactions.

Removing Crypto Loopholes to Target Russia

After returning from the G-7 summit in Belgium, Japanese Prime Minister Fumio Kishida called for the amendment to the foreign exchange law in parliament on Monday. He stressed the need for coordinated efforts to make the sanctions work. 

The amendment to the Foreign Exchange and Foreign Trade Act (FEFTA) has been planned to ensure Russia doesn’t bypass the international financial sanctions by using digital assets. The government will bring the new FEFTA proposition in the current session of parliament, Chief Cabinet Secretary Hirokazu Matsuno said in a press conference.

Although the details of the amendment are still being worked out, it’s believed that it will allow the government to ask digital agencies and banks for stricter scrutiny to ensure sanctioned Russian targets are not able to carry out financial transactions through digital assets.  

The Japanese authorities have, so far, frozen the assets of over 100 individuals and institutions in line with the financial sanctions against Russia by the US and the EU nations.    

Meanwhile, a firm response to the Russian invasion of Ukraine has won the Japanese government widespread support from its people. 

As per a survey, nearly 67% of respondents approved of the actions, including sanctions on Russian individuals and organizations and cancellation of the most favored nation trade status to Russia.    

Japan Has Been Keeping the Heat on

Earlier when Russia was cut off from the international payments system SWIFT, reports emerged that the country, especially its long list of oligarchs, may use cryptocurrencies to bypass the sanctions.

Rising to the challenge, Japanese financial sector regulators, especially Financial Services Agency and the Japan Virtual and Crypto Assets Exchange Association (JVCA) held discussions to remove the loopholes that may be used by sanctioned Russian individuals and organizations.  

Japanese Finance Minister Shunichi Suzuki said: “We are closely watching the situations of settlements such as crypto assets and SPFS in order to secure the effectiveness of sanctions against Russia.”

Later, Japan’s Financial Services Agency asked local digital assets platforms to stop facilitating transactions involving sanctioned Russian people and organizations. The number of sanctioned entities rose from an initial six to 50 and now to over 100 since the beginning of this month.