Japan to Take Legislative Action to Shut Russian Crypto Loopholes

Japan is reportedly set to make changes to its foreign exchange law to stop Russia from circumventing economic sanctions.

Reuters reported that Tokyo’s top officials have confirmed they will submit a revision of the Foreign Exchange and Foreign Trade Act to the current parliament session to strengthen protections against potential sanctions-busting by Russia through digital assets.

Saisuke Sakai, senior economist at Mizuho Research and Technologies told Reuters that the amendment “presumably enables the government of Japan to apply the law to crypto-asset exchanges like banks and oblige them to scrutinize whether their clients are Russian sanction targets.”

Prime Minister Fumio Kishida called for the law to be amended during a parliamentary session yesterday. He also stressed the need for coordinated moves with Western allies after attending last week’s Group of Seven summit in Belgium.

Earlier, Japan’s lawmakers had asked crypto platforms to fall in line with sanctions imposed against Russia following its invasion of Ukraine. 

Reuters reported on March 14 that the government asked crypto exchanges to not process transactions for Russia and Belarus, in accordance with the asset-freezing sanctions. 

In the U.S., Democratic senators introduced a bill last week to curb foreign cryptocurrency firms from doing business with sanctioned Russian entities. Additionally, the European Union issued guidance on March 9 confirming sanctions on Russia included crypto assets.

Japan has sanctioned more than 100 Russian officials

The government of Japan has sanctioned more than 100 Russian officials, business people, banks, and institutions. The country also banned high-tech exports and revoked Russia’s most-favored-nation trading status.

Last Friday, the government announced a ban on the export of luxury cars to Russia. Cars make up a large portion of Russia-bound shipments from Japan, which totaled 627.8 billion yen ($5.2 billion) in 2020, according to government data.

Of the total, autos such as passenger cars, buses, and trucks accounted for around 42% or 263.2 billion yen. Around 190,000 passenger cars, both new and second-hand, were exported to Russia, and the ban may be extended to used cars.