Japan to Revise Foreign Exchange Law Targeting Crypto Over Sanctions Evasion

Japan’s government is attempting to push through a revision of the country’s Foreign Exchange Act as it seeks to clamp down on crypto’s use as a means to evade sanctions imposed on Russia.

According to Japan’s Chief Cabinet Secretary Hirokazu Matsuno, speaking at a press conference on Monday, the government is coordinating with “relevant parties” to make adjustments before submitting a bill to the country’s 208th Diet session.

Following Russia’s invasion of Ukraine on Feb. 24, Western powers and their allies have moved in lockstep to impose economic sanctions against the former Soviet state. Crypto has been criticized by lawmakers for its role in evading those sanctions.

A revision to its act would enable the Japanese government to apply legal parameters around how crypto exchanges are governed within the country while forcing them to investigate potential cases of sanctioned Russian targets.

“In order to make the sanction more practical and effective, the decision was made to amend the Foreign Exchange Act…and the Finance Ministry is taking the lead,” Matsuno said.

Japan’s foreign investment regulations are split into regulations based on the Foreign Exchange and Foreign Trade Act as well as regulations based on individual laws. The “Forex Act” seeks to impose certain restrictions on foreign direct investments made by overseas investors.

The country’s Prime Minister Fumio Kishida said Monday that in order to strengthen sanctions against Russia, Japan needed to push through an amendment in order to close what it sees as a loophole exploited by crypto.

Earlier this month, Russia’s Foreign Ministry said it would end talks for a postwar peace treaty with Japan seen by some as a knee-jerk reaction to Japan’s sanctions against Moscow for its Ukrainian invasion, Kyodo News reported. Tokyo has heavily criticized Russia’s military campaign.

“Russia’s actions are extremely unreasonable and totally unacceptable,” said Kishida at the time. “All the current situations have originated from Russia’s aggression on Ukraine.”

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