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Japan Set to Tighten Crypto AML RulesJapan is working on tightening anti-money laundering (AML) rules relative to digital assets shortly. That’s according to a report by local media outlet Kyodo News.The stricter enforcement measures will take effect from June 1. The objective is to include the tracing of cryptocurrency asset transactions into the legal framework relative to AML, and in that way, bringing the application of AML in Japan into line with global standards.Photo by Louie Nicolo Nimor on UnsplashTravel ruleIn December of last year, the Financial Action Task Force (FATF), a global money laundering and terrorist financing watchdog based in Paris, France, deemed that the approach taken to crypto-related AML in Japan fell short of international requirements and best practice.Specifically, it’s the FATF’s “travel rule” that the Japanese are about to implement. Otherwise known as FATF Recommendation 16, the travel rule is a set of guidelines devised to prevent both terrorist financing and money laundering.The measure puts an onus on all crypto companies to screen all crypto transactions that exceed the value of $1,000 or a variance of this amount based on implementation by each FATF member state. As an example, in the United States, the FATF travel rule is being implemented with transaction monitoring being applied on transactions to the value of $3,000 and above.Once identified, the crypto firm must record details of the transaction and communicate that information, including both sender and recipient data, to the authorities. That would involve the sender and receiver’s legal names, their account numbers, and addresses. Relevant transaction activity includes exchanges between one or more forms of digital currency and the transfer of virtual assets.G7 alignmentThe move follows a decision taken at a Japanese cabinet meeting on Tuesday, as a direct response to FATFs recommendations. Following discussions earlier this month, the intergovernmental political forum of the G7 group of countries indicated its support for the FATF’s call for the establishment of the travel rule as a global standard. Japan is currently leading the group through its G7 presidency and likely wants to align with the views of its international peers.The country had been moving towards travel rule implementation in the past but in a less decisive way. Two years ago, Japan’s Financial Services Agency (FSA) requested virtual asset service providers (VASPs) to implement the travel rule. In a self-regulatory approach in 2022, the country’s Virtual Currency Exchange Association issued a recommendation for members to apply the rule.Those approaches lacked teeth, leading to a cabinet decision to amend existing legislation late last year and this more recent move to apply and enforce the rule.Regulatory frameworkWhile Japan may not be top of the class in terms of AML regulation relative to crypto, it is a forerunner in terms of crypto regulation generally. It was the first country in the world to suffer a serious crypto-related failure when the Mt.Gox cryptocurrency exchange collapsed in 2014.The fall-out from that collapse led to the Japanese introducing more stringent regulations although it took until 2017 to get them implemented. As a consequence, when the next major collapse occurred, the fall of FTX in November 2022, the Japanese have fared much better than investors located elsewhere. Regulation meant that a separate Japanese entity, FTX Japan, was established. It had to adhere to stricter conditions, meaning that FTX Japan customers have been allowed to withdraw their funds since February while their international counterparts must undergo a much longer process to recover their funds.

Bitget Adopts Stricter KYC Measures in Line with Global RegulationsBitget, the cryptocurrency derivatives exchange registered in Seychelles, has announced a significant update to its Know Your Customer (KYC) requirements.Announced via a blog post published to its website on Sunday, the move is aimed at enhancing user security and ensuring compliance with evolving global regulatory guidelines, joining other exchanges like KuCoin and OKX in tightening its KYC policies.Photo by Brett Jordan on UnsplashChanges taking effect in SeptemberStarting from September 1, Bitget will enforce level 1 KYC verification for all new users accessing its services, including depositing and trading digital assets. Existing users are also required to complete this level 1 verification by October 1. After this deadline, users who have not completed the verification will have limited functionality on the Bitget platform, including only being able to withdraw, cancel orders, redeem subscriptions, and close positions. They will be unable to initiate new trading orders.The KYC process involves verifying users’ identities and is commonly used by regulated entities to assess risk. Bitget emphasizes the importance of this verification process to maintain a secure trading environment and comply with regulatory recommendations.Following an industry trendBitget’s decision to reinforce its KYC standards aligns with the broader trend observed across the cryptocurrency exchange landscape. In the wake of increased regulatory scrutiny earlier this year, many exchanges have taken steps to strengthen their verification procedures. KuCoin, for instance, introduced mandatory identity checks in July to align with global Anti-Money Laundering (AML) regulations. Similarly, OKX is implementing a KYC process for identity verification, with a deadline also set for September.As regulatory frameworks evolve worldwide, cryptocurrency exchanges are under increased pressure to align with stricter standards. Bitget’s decision to enhance its KYC measures signifies its intention to maintain a secure and compliant trading environment for users, and to appease global regulators. This announcement follows a series of proactive steps taken by the exchange this year, indicating its dedication to navigating the changing regulatory landscape and promoting user security.Bitget has made headlines throughout the year for various developments, including the inclusion of Liquid Staking Derivatives (LSDs) as a margin option for crypto futures customers. As recently as last week, the platform garnered attention within the crypto sector, having gotten itself embroiled in a legal dispute with crypto influencer Evan Luthra.Earlier this year the platform acquired the Singapore-based BitKeep cross-chain wallet business. It’s believed that acquisition has assisted the company in achieving further growth in 2023, with 20 million users.Bitget invested $10 million in Fetch.ai, an artificial intelligence platform, and launched a referral program to expand its user base. Moreover, Bitget’s collaboration with comedian Adam Devine for a promotional campaign underscored its innovative marketing strategies.Bitget’s adoption of stricter KYC measures reflects the broader trend of exchanges bolstering their verification procedures in response to global regulatory changes. As regulatory expectations continue to evolve, exchanges worldwide are revisiting their policies to ensure a secure and trustworthy trading environment for their users.

South Korean financial regulators have decided, at least for the time being, to maintain the current policy requiring cryptocurrency exchanges to partner with only one bank, according to a report from the Seoul Economic Daily.Photo by POURIA 🦋 on UnsplashDominance and money laundering concernsA government official cited concerns that allowing multiple banking relationships could potentially strengthen market dominance by leading platforms and increase money laundering risks. Regulators plan to revisit the issue after monitoring new developments following upcoming regulations that will permit institutional participation in the crypto market. This decision runs counter to a recent proposal put forward by the People Power Party (PPP) ahead of the presidential election that seeks to eliminate the one-bank-per-exchange requirement. Bizwatch reported that while the crypto industry initially supported the removal of this restriction unanimously, opinions have recently diverged among market participants. Divided industryMajor exchanges offering Korean won-based trading are mostly against the potential policy change. Except for Upbit, the country's largest platform, competitors express concern that modifying the rules could weaken their existing banking relationships if more financial institutions choose to partner with the market leader. Conversely, crypto-only exchanges, which cannot offer Korean won trading services, generally favor eliminating banking restrictions. These platforms believe relaxed regulations could create more opportunities to establish banking partnerships. Under current rules, virtual asset service providers must secure real-name accounts from a local bank to offer Korean won trading, placing those without such accounts at a competitive disadvantage. Banks also want changeKorean commercial banks align with crypto-only exchanges in supporting the easing of banking regulations. Jung Jin-wan, CEO of key financial institution Woori Bank, recently called for allowing multiple banks to serve individual crypto exchanges. He argues that the current one-bank-per-exchange system not only undermines systemic stability but also limits customer choice. While an official from a crypto-to-fiat exchange acknowledged the need for eventual reform of the one-bank-per-exchange system to improve customer options and market development, they also pointed out that industry stakeholders hold different views depending on their position in the market. The official said that dominant platforms perceive minimal practical benefits from permitting multiple banking relationships.