Japan plans to combat fraud among crypto dealers

Japan’s top financial regulator said his planned platform to combat money laundering could include cryptocurrency dealers, which he said have the same obligation as traditional financial institutions to make sure they don’t deal with criminals.

The Financial Services Agency has said it is planning to create a common industrywide system that financial firms could use to judge whether their clients might be terrorists and whether client accounts are at risk of being used for money laundering.

“In the sense that they are prohibited to deal with those subject to sanctions, cryptocurrency dealers are the same as banks,” said FSA chief Junichi Nakajima in an interview with The Wall Street Journal.

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Securities and Exchange Commission Chairman Gary Gensler this week called on Congress to grant the agency more scope and resources to oversee the cryptocurrency sector, which he likened to the Wild West.

“Because we have the same list of international terrorists, it would be more cost-effective and more accurate if we create a shared system, rather than doing it by individual financial firms,” said Nakajima, who assumed his post in July.

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Nakajima said his agency expects to put together a plan for the new platform by around the middle of next year.

Nana Otsuki, chief analyst and executive director at the brokerage division of Monex Group, which operates a cryptocurrency exchange, said making cryptocurrency dealers part of such a system would be positive for the sector over the long term.

“In the medium to long term, it is more sustainable if they can eliminate the perception that cryptocurrencies are dangerous financial products with underground money and turn them into a pure investment tool, even though their volatility remains high,” Otsuki said.

Otsuki said the project faced challenges that would require cross-governmental collaboration, such as ensuring that suspect individuals with complicated non-Japanese names would be properly registered in a database.

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In addition to its effort to combat money laundering and other crimes, the FSA has started a research group to look at promoting financial innovation including blockchain, the ledger system underlying bitcoin and other cryptocurrencies.

Nakajima said he wanted a balance between regulation and fostering financial innovation. “We will look at both aspects without bias,” he said of the research group.

Write to Megumi Fujikawa at [email protected]

This article was published by Dow Jones Newswires

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