Japan's primary financial regulatory body, the Financial Services Agency (FSA), has clarified its position regarding peer-to-peer (P2P) cryptocurrency trading in response to recent guidance provided to local banks.
In a letter dated February 14, the FSA urged banks to enhance user protection measures and to halt transfers to cryptocurrency trading service providers if the sender's name does not match the account name. Concerns about its potential impact on P2P transfers in Japan, where transactions often involve different individuals on the sender and receiver sides.
Responding to inquiries, the FSA clarified that its guidance does not pertain to transactions between individuals. Rather, its objective is to compel banks and financial institutions to bolster safeguards against illicit fund transfers from personal bank accounts to accounts associated with cryptocurrency trading platforms.
Illustratively, in a scenario involving a fraudster (X) and a victim (Y), the fraudster may coerce the victim to transfer funds from her bank account to a newly created cryptocurrency account under the fraudster's name. To bypass restrictions on cryptocurrency platforms, the fraudster may persuade the victim to change her name to match the fraudster's, thereby facilitating the deposit. However, under the FSA's new guidance, banks are advised to block suspicious transactions where the sender seeks to alter their name to deposit funds into a cryptocurrency platform.
While certain financial institutions in the UK have already implemented these measures, the FSA has not received reports of specific cases raising concerns about the crypto asset market. The FSA emphasizes that its guidance is not universally mandated for all financial entities, as banks will determine and implement specific measures based on their individual circumstances and risk assessments.
Meanwhile, Japan's neighboring country, South Korea, is also intensifying efforts to combat cryptocurrency-related fraud. Its financial intelligence unit plans to introduce a proactive trading suspension mechanism for suspicious transactions on platforms operating within the country, enabling the freezing of transactions during the pre-investigation phase.
