- Top government officials stated on Monday that Japan will alter its foreign exchange rules to prevent Russia from dodging Western financial sanctions by using digital assets following Moscow’s invasion of Ukraine.
- According to Chief Cabinet Secretary Hirokazu Matsuno, the government will submit a reform of the Foreign Exchange and Foreign Trade Act to the current parliament session to improve protections against potential damage imposed by Russia through digital assets.
- Following last week’s Group of Seven conference in Belgium, Prime Minister Fumio Kishida urged for the law to be revised in a Monday parliament session, stressing the importance of synchronised steps with Western partners.
Top government officials stated on Monday that Japan will revise its foreign exchange legislation to avoid Russia from dodging Western financial sanctions by using crypto assets in the aftermath of Moscow’s invasion of Ukraine.
Larry Fink, CEO of BlackRock Inc. (BLK.N), said on Thursday that the Russia-Ukraine crisis could hasten the adoption of digital currencies as a means of settling international transactions, as the conflict upends the last three decades’ globalisation drive.
In a letter to BlackRock shareholders, Fink said the war will force governments to reconsider their currency reliance, and that the company is exploring digital currencies and stablecoins due to rising customer demand.
According to numbers provided by BlackRock Inc this month, the asset manager’s entire client exposure to Russia has dropped to less than $1 billion from $18 billion before Moscow’s invasion of Ukraine prompted Western sanctions and the shutdown of the Russian stock market. find out more
Russia’s efforts in Ukraine are referred to as a “special operation.”
At a press briefing, Chief Cabinet Secretary Hirokazu Matsuno said the government would propose modifications to the Foreign Exchange and Foreign Trade Act in the current parliament session to bolster defences against suspected sanctions-busting by Russia using digital assets.
Following last week’s Group of Seven conference in Belgium, Prime Minister Fumio Kishida asked for the law to be revised in Monday’s parliament session, emphasising the importance of synchronised steps with Western partners.
A Finance Ministry official told Reuters that discussions on the planned adjustment were still ongoing and that he couldn’t provide any additional information.
According to Saisuke Sakai, senior economist at Mizuho Research and Technologies, the review “probably authorises the government to apply the law to crypto-asset exchanges like banks and force them to assess if their clients are targets of Russian sanctions.”
Crypto exchanges in Japan have been forced to follow Russian sanctions and not handle any crypto transactions with Russian or Belarusian accounts.
The Japanese Payment Services Act regulates cryptos and utility tokens such as Bitcoin (BTC) and Ethereum (ETH) as ‘crypto assets.’
In addition, depending on whether the stablecoins are redeemable in fiat currency, stablecoins like Tether (USDT) and USD Coin (USDC) may likely fall under either crypto assets or form of payment in fund remittance transactions.
To maintain the G7 momentum alive, the country’s financial watchdog, the Financial Services Agency, remarked, “the sooner the better.”
The G7 countries, as well as the United States and the European Union, have issued a declaration imposing severe crypto penalties on Russia.
The united declaration highlights why Russia cannot utilise crypto to dodge sanctions by cracking down on perceived crypto usage. It said,
“We will ensure that the Russian state and elites, proxies, and oligarchs cannot use digital assets to evade or negate the impact of international sanctions, which would further limit their access to the global financial system, in addition to other steps intended to prevent evasion.”
Japan’s banking authority ordered 30 cryptocurrency exchanges in the nation not to exchange assets for sanction operations earlier this month.
A legislative assessment is a more powerful step in putting such regulations in place. Given the tighter restrictions of Western authorities on the subject, as well as popular approval in Japan for sanctions against Russia, the Kishida government likely established the legal review plan, as per economist Sakai.
The foreign exchange legislation allows for the proper expansion of international transactions by conducting the bare minimum of transaction management and coordination. Currency balance and stability are restored as a result of this.
Changing the law to allow crypto to be used in international transactions will necessitate strict regulations. As a result, crypto exchanges and firms in Japan would be forced to investigate sanctioned countries and persons.