The government of Japan has noted that significant credit agencies will compute the users of cryptocurrencies to stop the usage of digital assets in money laundering got from illegitimate operations, just after revealing the plans to crackdown unknown cryptocurrencies such as Monero, Zcash and Dash.
The government will work hand in hand with Japan Credit Information Service (JCIS), Credit Agencies and Information Security Research firms to carry out a thorough investigation on suspected cryptocurrency trading accounts plus all individuals that sell and purchase unusual huge volumes of digital assets starting within a few weeks.
The local authorities have come up with the decision to strictly inspect all the local cryptocurrency platform market and closely track huge transactions since there are various claims indicating that Yakuza which is the largest criminal syndicate in Japan is taking advantage of cryptocurrencies to regularly launder hundreds of millions of dollars.
The authorities also noted that individuals who are being suspected of being connected to any terrorist and criminal organisations based on their credit scores and social media occurrence will also be target of examination and the four credit agencies plus local financial authorities will carry out a deep evaluation of crypto platform accounts that are owned by the suspected people.
"By providing the personal information of suspicious individuals including credit scores and financial data, the government hopes to protect investors and improve the security of the Cryptocurrency industry," the current chairman of JCIS, Yizumi Nobuhiko said.
In order to stop personal information from leaking, these four credit agencies must never give important personal and financial data except when the local financial authorities possess a clear basis to suspect some entities and individuals to participate in a crime syndicate or money laundering scheme.
The government has ordered 6 out of 16 crypto exchanges licensed by Financial Services Agency (FSA) of Japan to revise their Know Your Customer (KYC) system and Anti-Money Laundering (AML).
FSA carried out an investigation and found out that major crypto exchanges such as bitFlyer, japan's highly utilised crypto exchange, had defects in their KYC and AML systems which are not competent enough to curb money laundering problem. Following orders from the government, the exchanges paused registering fresh users and resorted to fixing their internal management systems.
The founder of cryptocurrency hedge fund BKCM and CNBC Fast Money contributor, Brian Kelly revealed that the initiation of better processing of internal management systems by all crypto exchanges in Japan will facilitate the domestic crypto market to transform into a legal industry that will be of great importance in future.
Kelly said that the Japanese government ordered crypto exchanges to highly increase business conditions showing that it's going to be less tough in the short run since they are preventing the registration of new accounts. However, the exchanges are working tirelessly to make it a point that the system is more robust and much better for all users.
Sergey Vart, CEO at Cereal Finance - a platform offering credit products that are secured by customers’ mining equipment, cryptocurrencies and other blockchain assets - commented to Coinidol:
“Japan is the highest-volume country for cryptocurrency trading in the world. With this bold title comes its respective black markets. Sanctioning oversight from Japanese Credit Services and Security Firms adds a much-needed level of accountability, helping stop huge criminal enterprises such as the Yakuza. Implementing stricter KYC/AML practices for exchanges will also steer away criminal activity, leading to a safer and more user-friendly experience. An audited exchange is a safer exchange.
At the end of the day, you have to recognize how much positive this brings to the public perception of cryptocurrencies. Without regulation, Japan would be perpetuating the mass misconception that crypto is mainly used for the dark web of criminal activity. This would only stunt our community growth and encourage more criminal behavior. Providing these accountability measures paves the way for other countries to follow suit. It’s great to see Japan raising the standard of practice for regulations in crypto."
"In the short term, are there negatives? Absolutely. We see that Bitflyer, among many other exchanges, had to stop registering new users to build out stronger KYC/AML practices. However, this is a drop in the bucket compared the overwhelming amount of good this ultimately has by legitimizing cryptocurrencies in the public eye.”